Participant has Excess Deferral for 2003 $1,000. Payroll Admin. at Company wants to know if she can adjust (Reduce) the amount of Deferral on 2003 W-2

[Guest ROB VIDOVICH]

Payroll Admin. at Company has not processed the 2003 W-2's. She wants to know if she can adjust or reduce the amount of deferrals on the W-2 from 13,000 to 12,000????

The 1099-R issued in 2004 for the distribution of the Excess Deferral and income should take care of the adjustment ????

Thanks for your help.

Also, the match on the excess deferral would this be treated as a forfeiture???

[Guest yukon]

I'm trying to think why this wouldn't work. The first thing that comes to mind is that it would create a conflict for the ppt's tax filing. The 1099-R (if refund is processed prior to 4/15/04) would indicate excess deferrals in '03, but ppt's adjusted W2 would not confirm this. Right?

[chris]

I guess the 401(k) does NOT allow for catch-up contributions?

[Guest ROB VIDOVICH]

I'm trying to think why this wouldn't work. The first thing that comes to mind is that it would create a conflict for the ppt's tax filing. The 1099-R (if refund is processed prior to 4/15/04) would indicate excess deferrals in '03, but ppt's adjusted W2 would not confirm this. Right?

Right..... the Payroll Admin. would reduce the deferral amount to 12,000. Maybe the W-2 should not be adjusted and the participant will receive the 1099-R in January 2005 and report the excess then..

I'm thinking this would cause a conflict with the participants tax filing for 2003 and 2004 by reporting the excess twice.

[Guest ROB VIDOVICH]

I guess the 401(k) does NOT allow for catch-up contributions?

The plan does allow for Catch-Up contributions but the participant is not Age 50....

[R. Butler]

1. You do not adjust the W-2 for an excess deferral.

2. If the corrective distribution is made by 4/15 it is taxable in the year in which originally deferred. Any gain adjustment would be taxed in year of distribution. If corrective distribution is made after 4/15, the excess deferral is taxed in both the year originally deferred & the year of distribution.