ADP refunds to an HCE who had a 402g failure as well?

[Guest KD40]

I have a participant who is due a refund for ADP failure. He also failed the 402g violation for the year as well. How are these refunds supposed to be treated? I know the total deferral dollars are left in the testing for ADP since he is an HCE, but was confused on how the refunds are to be done.

[Tom Poje]

your choice.

see 1.402(g)-1(e)(6) and/or 1.401(k)-1(f)(5)

the example from the ERISA Outline Book is as follows:

plan year 12/31/2001

excess contribution = 1000

excess deferral = 600

1. distribute 600 first excess deferral

the 400 as excess contribution

2. distribute 1000 as excess contribution. the excess deferral is considered corrected at this point.

however, for tax purposes the plan must report 600 as an excess deferral, and the remainder as excess contribution.