415 Excesses

[Guest pjb]

I'm new to 403(B) plans...

Correcting 415 excesses appear different than handling 401(a)/401(k) plans.

I'm looking at Pub 571. It says, 415 excesses are includible in the employees income and deferrals may be distributed to correct the excess. Later, Pub 571 says if custodial accounts, 415 excesses should be corrected either by contributing less than the applicable limit in later years or by making "permissible distributions." A permissible distribution is a dist on account of age 59 1/2, severance, etc.

If a person isn't permitted to take a distribution (because deferrals aren't enough and he/she hasn't reached age 59 1/2), Pub 571 implies the amount is still includible in income. Is this correct? Does the amount stay in the plan as after-tax?

My second question is, can an employer choose reallocation as a corrective method like 401(a) plans?

Thanks