Failed ADP - Recharacterization

[Guest Ted Kowalchuk, CFP, CFS,]

Must the HCE Participant elect to have excess contributions recharacterized as an after-tax contribution, or can the current Trustee make this determination prior to March 15th? We have an LLC client where the HCE / former owner/ former Trustee sold his share of the business on June 30, 2005, but took a compensation guaranteed payment of $50,000 instead of the $100,000 scheduled for the entire year. Since he salary deferred $9,000 prior to termination, his final deferral rate became 18% instead of the planned 9%. A failed ADP test has resulted. This same HCE participant, the only HCE, rolled his money out of the Plan prior to 12/31/05 and there are now no funds available to process a corrective distribution. Other than some type of recharacterization, the client will need to make a $28,000 QNEC. Any thougts would be appreciated.