Is 5330 needed for amounts returned due to 415 limits?

[Guest dlm]

A Profit sharing plan (w/401k provision) is written such that if a person exceeds the 415 limit, then 401(k) deferrals are returned 1st.

If the deferrals are returned 2 1/2 months after plan year end, is IRS Form 5330 needed? (as in the case of a failed k test) Or do we just return the deferrals and that's that?

thanks

[Guest Connie]

We do not file Form 5330 for returns of 415 excess that are made within the time allowed. My understanding is that Form 5330 is required if the excess is returned to the participant late and there is a penalty due.

[Disco Stu]

I agree with Connie, and would add that the 2 1/2 month deadline only applies to correcting a 401(k)/401(m) test failure. It does not apply to salary deferrals returned to correct a 415 excess. My understanding of 415 is that there is no specific deadline for correcting a 415 problem. Any 415 problems should be corrected within a reasonable time after their discovery.

In practice I think it is wise to fix any 415 problem within 12 months of the end of the limitation year involved.

No 5330 needed.