401k Deferrals - Fiscal Year Plan

[DP]

I have a SH PS 401k plan with a 7/31/05 year end. The 401k was implemented as of 8/1/04. One of the HCE's (under age 50) contributed $13,000 in 401k deferrals from 8/1/04 - 12/31/04. From 1/1/05 - 7/31/05 he contributed another $7,000 in 401k deferrals, giving him a total deferral of $20,000 for the plan year.

He did not violate the individual 401k limit based on a calendar year. Has he violated any other 401k limits based on the plan year?

Thanks.

[R. Butler]

Has he violated any other 401k limits based on the plan year?

Probably not. You'd need to review the document ot see if it limits deferrals.

[DP]

No, the document does not limit deferrals.

Let's suppose the corporation decides to give the HCE a total of $28,000 in PS/SH contributions for the 7/31/05 plan year. This contribution, along with his 401k deferral, will put the HCE over the $42,000 contribution limit.

Would we need to refund part of the 401k deferrals to the HCE, or lower his PS contribution? They have an integrated PS contribution formula.

Thanks.

[Blinky the 3-eyed Fish]

Again that is a specfic document question. I can tell you that most documents though provide for the return of deferrals so that the 415 limit is not violated.

[No Name]

In fiscal year situations, sometimes the "offending" deferral hits the account sometime later than the end of the year.

[DP]

Here we are at the end of the 7/31/05 plan year. The HCE has an Excess Annual Addition of $1,940. The plan states the Elective Deferrals will be distributed to reduce the excess amount.

Since this is a fiscal year plan, do we have to actually refund the $1940 and give him a 1099-R or can we carry the $1940 over to the new fiscal year of 7/31/06 as a 401k deferral? The HCE has exceeded no calendar year limits.

I'm confused. Thanks.

[R. Butler]

You need to follow the terms of the plan. If HCE exceeded the annual addition limits & the document says you correct by distributiing employee deferrals then that is what you do. Don't forget to distribute the gains on those deferrals. A 1099-R would be issued.

I am assumimg that this is the same HCE mentioned in your initial post to the thread.