One to One correction method / Catch up contributions

[fiona1]

Assume 1/1/02 to 12/31/02 plan year.

ADP failed, resulting in refunds to some HCE's.

Refunds were not made by the 12/31/03 deadline.

Plan Sponsor is correcting the operational defect by the one to one method -distributing the excess contribution to the HCE's and contributing to the NHCE's an amount equal to that distributed to the HCE's.

The plan has a provision for catch up contributions and one of the HCE was age 50 by 12/31/02. Should their refund be recharacterized as a catch up contribution? Will the amount of the QNEC made to the NHCE's be before or after the recharacterization of the catch up monies?

Thanks for any help.

[fiona1]

Anyone?

[Archimage]

The one-to-one correction method has nothing to do with how the catchup is treated. Your should have recharacterized the excess as a catchup back when you originally ran the test. Whatever is leftover after the recharacterization is the amount that should have been refunded. Using the one-to-one correction method you would refund this amount and then have to contribut a QNEC in the amount of the actual refunds.

[jquazza]

I agree with Archimage, the catch up provision lowers the refunds, hence lowers the QNEC.