Correcting excess annual additions

[Guest planman]

I need some guidance on negative earnings when returning 401(k) and matching contributions to pass 415 test.

We have a DC pension plan and a 401(k) plan with matching contributions (all pre-tax money). Some participants exceeded $40,000 for the 2002 year test. To correct, (based on plan document), we plan to return 401(k) deferrals and forfeit the associated match. We expect the actual refund amount to be impacted by plan year earnings. The 401(k) deferrals will be reduced for negative earnings (i.e. $1,000 contribution and negative $150 earnings yields $850 refund). But is the matching contribution supposed to get impacted only by positive earnings, and ignore negative earnings? Does this seem right....both positive and negatie earnings for the 401(k), but only positive earnings for the match? What the proper way to count earnings to complete the refunds? Thanks for your thoughts.