401(k) refund, maximizing owner

[pmacduff]

Let's say you have a 401(k) plan where the ADP fails. The owner takes a refund of contributions/earnings before March 15th and reports it on his 2003 return. Ok, same plan has a cross-tested ps allocation formula. Can this owner/participant still get to $40,000 using the "net" deferral amount (after refund)? Or must the entire amount he deferred prior to the refund be included toward his individual limit? Cites are appreciated. Thanks in advance.

[Archimage]

The excess deferrals are computed as part of their 415 limit unless they are recharacterized as catch-up contributions. Unfortunately I do not have a cite. Hopefully someone else can give the cite you need.

[Blinky the 3-eyed Fish]

If the refunded amounts are considered annual additions, then of course you must count them in determining the DC 415 limit. So, here is the last part of 1.415-6(b)(1)(i):

"Contributions do not fail to be annual additions merely because they are excess deferrals, excess contributions, or excess aggregate contributions or merely because excess contributions or excess aggregate contributions are corrected through distribution or recharacterization. Excess deferrals that are distributed in accordance with section 1.402(g)-1(e)(2) or (3) are not annual additions."