Late Deferral Deposits and Failure of ADP

[Guest Jimmy B]

I have two problems with the same client:

1. Several deferral deposits for 2000 were not made on time, but they were made several days late. Since this is a prohibited transaction, is there any other correction other than filing 5330 and paying the excise tax? My understanding is that this is not eligible for correction under APRSC. Is there anything related to the DOL that I need to consider?

2. An excess deferral withdrawal related to the 1999 ADP test was not made until 2001 so the plan fails ADP tests for 1999. Other withdrawals were made before 12/31/00. Can I correct under APRSC or does it have to be under SVP? I realize that an excise tax will be imposed on late withdrawals.

Thanks for any help!

[R. Butler]

1. Filing the 5330 and paying the excise tax is not the correction, it is the penalty for making the late deposit. The correction is remitting the money and making up lost earnings. You should make the correction before filing the 5330. The 5330 should be filed and excise tax should be paid. The tax is generally nominal.

Late deposits generally is not a qualification issue. Once you have made the correction and filed the 5330, you should be done.

2. I am fairly ceratin you can still self correct on the failed ADP test. The permitted correction is QNEC's. See Rev Proc 2001-17 partciuclary Appendix B.

The "other withdrawals..." comment I don't really follow, so I didn't consider it.