Anyone have experience w/ late deferrals for HCE only?

[jkharvey]

The only deferrals not deposited were those of the HCE. Anyone know if DOL looks "more favorably" on this type of late deferral than one where all deferrals are not deposited timely?

[Belgarath]

I'm not aware of any guidance that would allow this. Is it by any chance an unincorporated plan, where they could delay the deferral until after the close of the year for the owner(s)?

[jkharvey]

No, plan is a corporation. I called the DOL and they were MOST unhelpful. Actually, I thought the guy was rude. He did tell me that the owner would be treated as any other participant other wise it could be discriminatory. I didn't understand that one.

Anyhow, I really just wanted the ER to treat this amount (it's only $1400.00) as never having been a deferral in the first place. Amend the W-2 and related filings. They don't want to do this for some reason.

To make matters even more interesting, they fail ADP and have to return part of this amount that was never even deposited.

[R. Butler]

I'm a little curious. What would happen if the plan sponsor just didn't deposit that late deferral until more than 12 months after the plan year? §1.401(k)-1(b)(4)(i)(2) requires that in order to be considered in the ADP test the deferral must actually be deposited within 12 months after the end of the plan year. If there is penalty because refunds don't occur within 2 1/2 months after the close of the plan year, that penalty may very well exceed the exicse tax on late deposits. What would prevent the HCE in this situation form doing this?

I've never done this & don't advocate it; I've just always wondered what would happen if someone did do this.

[jkharvey]

Good point Mr. Butler. I need to find out when they expect to make the deposit. The whole thing is a mess which is crazy since it's such a small amount and they now are terminating. Bankruptcy, divorce and the works.

[R. Butler]

Good point Mr. Butler. I need to find out when they expect to make the deposit. The whole thing is a mess which is crazy since it's such a small amount and they now are terminating. Bankruptcy, divorce and the works.

I am not rcommending that you do that, I've just always been curious about that question

[jkharvey]

I am not planning to recommend that they hold off on making the deposit. I'm not sure, however, when they actually plan to make it. If they aren't going to make it in the next few months, this issue about whether or not the deferrals even count toward ADP may be valid.

[mbozek]

Why not show the employer how much in taxes will be due if the excess deferral is contributed to the plan at this time instead of being returned to the participant. The er doesnt want to amend the W-2 because the HCE will have to amend his income tax return for additonal income. The employer has to amend the W-2 to remove the contribution or make the contribution with all of the tax consequences.

[actuarysmith]

This is a DOL issue - NOT an IRS discrimination rule. I doubt the DOL makes any distinction between HCE's and NHCE's when deterimining compliance with timely deposits.

An HCE may be a participant and not an owner or officer. They may not have any control over remitting deposits. The DOL should protect them just like any other participant.