402(g) failure

[k man]

my understanding is you return the 402(g) excess and issue a 1099. also you include the excess for HCE's but not for NHCE's. is this in in the regs and do they permit other methods of returning the excess such as returning the money through payroll?

[R. Butler]

also you include the excess for HCE's but not for NHCE's. is this in in the regs

Yes. See 1.402(g)-1(e)(1)(ii).

"...(ii) Treatment of excess deferrals as employer contributions. For

other purposes of the Code, including sections 401(a)(4), 401(k)(3),

404, 409, 411, 412, and 416, excess deferrals must be treated as

employer contributions even if they are distributed in accordance with

paragraph (e)(2) or (3) of this section. However, excess deferrals of a

nonhighly compensated employee are not taken into account under section

401(k)(3) (the actual deferral percentage test) to the extent the excess

deferrals are prohibited under section 401(a)(30)..."

do they permit other methods of returning the excess such as returning the money through payroll?

No. See 1.402(g)-1(e)(2)(ii),(3)

"...(ii) Not later than the first April 15 following the close of the

taxable year, the plan may distribute to the individual the amount

designated under paragraph (e)(2)(i) of this section (and any income

allocable to that amount).

(3) Correction of excess deferrals during taxable year--(i) A plan

may provide that an individual who has excess deferrals for a taxable

year may receive a corrective distribution of excess deferrals during

the same year..."