Correction and reporting of excess deferrals, governmental vs. tax-exempt entity plans

[Ken Davis]

Want to be sure I'm reading the 1.457-4© regs (and the Treasury Decision 9075 preamble to the regs) correctly.

For governmental plans, the excess deferral and income earned by it must be distributed to the employee "as soon as administratively practicable" after the excess is discovered and determined. The income earned by the excess deferral is reported on Form 1099 for the year of distribution, but the excess deferral is included in gross income for the year of the deferral (presumably by way of a corrected W-2).

For tax-exempt entity plans, if the excess and the related earnings are distributed to the employee by April 15 after the deferral year, the reporting is different than a governmental plan. The income earned by the excess deferral is reported on Form W-2 for the year of distribution, but the excess deferral is included in gross income for the year of the deferral (presumably by way of a corrected W-2).

I'm only looking for a "Yes, Ken, that's correct (or incorrect)" type of answer, but if anyone knows why governmental plans report the earnings on Form 1099 while tax-exempt entity plans report the same thing on Form W-2, I'd love to hear the explanation.

Thanks,

Ken Davis

Univ. of South Alabama