What to do with excess contributions that were mistaken rolled over to

[Guest Plan the Man]

:confused: :confused:

Please help....

Excess contributions were rolled over from a terminated qualified plan along with the rest of the assets to a 401(k). Recently (July 2001), it has been discovered that there were excess matching contributions to 4 employees in 1999 and 2000. I've investigated the matter and found that it qualifies as a insignificant operational failure that can be corrected by a SCP.

The main problem : These excess contributions never should have been rolled over from the old terminated plan to the new 401(k). Therefore, they must be rolled back to the old terminated plan. In other words, the excess contributions belong to the old plan, thus, they cannot be put in a suspense account or simply transferred and used against future matching contributions. What can the employer do with this money so that the old plan is not disqualified (and thus would immediately tax all the rollovers) and what would be its tax treatment (i.e. 1099 forms, etc.)?

We greatly appreciate any help in this matter!

P.S.: The organization is privately owned.

[mbozek]

If the plan has been terminated how can assets be rolled / transferred back? Can the terminated be amendended to conform to all of the applicalbe tax provisoins effective in 2002?Second -- How will the employees refund the money ?? Third If excess contributions were rolled over there is a 6% excise tax on the exces amt. Fourth is the plan going to file 5500 after the final year of termination??

Suggestion: Amend the terminated plan to include the excess amt as an additional contribution which will eliminate the need to make a refund to a terminated plan. Option two: treat the excess as a contribution to an 403(B) annuity and transfer it to a 403(B) contract for the employees.