Fiscal year plan with ADP refund and FIFO calculation?

[Guest oxdougw]

Typically with a FIFO requirement on the ADP refund calculation on a 12/31 PYE plan, the participant with the refund would have to add that into his tax return he is currently preparing for the tax year in which the deferrals took place.

However, when the plan has a 6/30 PYE and the FIFO refund goes back to the prior tax year, does that participant really have to amend that prior year return or is the refund taxable in the current year?

I seem to remember the IRS providing some guidance on these circumstances but don't have a reference to look up.

[ljr]

Yes, the participant would indeed have to go back and amend their return. That's why we recommend to non-calendar year plans that they delay refunds so they are taxable in the year of receipt and just file the excise tax return and pay the tax. In many situations that's better than having to tell the HCE's the file amended tax returns.

[Earl]

and tell the HCEs to only defer in the second half of the plan year