Gap period interest on excess deferrals

[Just Me]

The new final 401(k)/(m) regs require that gap period interest is paid on refunds of excess contributions and excess aggregate contributions (ADP and ACP failures). Is there any requirement that gap period interest must be paid on refunds of excess deferrals (402(g) limit), or is that still optional based on what the plan says?

Thanks!

[Just Me]

Does anyone know the answer to this one? Thanks.

[MWeddell]

Reg § 1.402(g)-1(e)(5)(i) states that gap period income on excess deferrals is refunded only "if the plan so provides." This provision was not changed by the final 401(k) / 401(m) regulations. It seems clear that (for now anyway), that it is still optional based on what the plan provides.

[Just Me]

Thanks. I had seen that provision of the Regs., but being so similar to what the 401(k) regs used to say that I wanted to make sure that wasn't also changed.

[MWeddell]

It never hurts to post the question.

However, unless there is new legislation (not in this case), we are entitled to rely on regulations until they are revoked or amended. Hence, even if the IRS were planning to make the excess deferrals rule similar to the new 401(k) excess contributions rule, you can continue to rely on the 402(g) regulation in the meantime.