402(g) refund

[Guest timgrace]

Is it permissable to refund 402(g) excess for 2001 via a payroll adjustment (negative contribution) in 2002? The employer has adjusted the W-2 for 2001 to reflect the payroll adjustment from 2002. If this is allowable, do earnings have to be included in the payroll adjustment? If not allowable, what are the implictions? Thanks!

[Guest Paula F]

My opinion is that you cannot refund a 402(g) excess for 2001 via payroll adjustment. The 402(g) excess for 2001 is taxable income for 2001. Negative contribution in 2002 reduces taxable income for 2002.