Refund of Excess Contributions

[Guest Sara H]

A client of mine failed the ADP test. I completed the paperwork to have the investment company process a withdrawal of excess contributions and faxed it to them yesterday (March 15th). They informed me that when this form is received after 4pm EST that the withdrawal will not be processed until the following day. Is a penalty owed by the client seeing that a good faith effort was made to get the distribution done in a timely manner?

[Harwood]

Define 2 1/2 months.

[Brian Gallagher]

For Pension Answer Book 2003:

"If the plan year coincides with the calendar year, then a distribution on or before March 15 of the current year is taxable to the participant in the prior year." Q27:33

In a further example of a plan year end of Oct 31, the excess should be removed by Jan 15.

It seems like the 15th is the magic # for the 1/2 part of 2 1/2 months.