Excess deferrals

[rlb64]

Participant exceeded 402(g) by aggregating deferrals in 2 unrelated employer plans. Deferrals in each did not exceed the 402(g) limit. Must earnings be paid out? How would it be calculated?

[Archimage]

Yes, earnings must be paid out and any reasonable estimate of earnings should suffice.

[rlb64]

Is the participant responsible for calculating the earnings in this case?

[WDIK]

I would certainly hope that both plans have procedures, policies and plan language in place that need to be followed in such a situation. It does not seem reasonable to me that a plan administrator would want the affected participant to determine the allocable earnings.

[Tom Poje]

WDIK makes a good point, that might bear explaining further.

plans have requirements regarding excess deferrals in regards to the plan itself. in this particular case neither plan is in violation of excess deferrals.

general rule is if an individual is in more than one plan he needs to notify one of the plans of any excess. (But he would not figure the amount of gains/loss)

it is entirely possible the participant is out of luck - that neither plan calls for a distirbution. that means the participant will be taxed twice on the excess.

[rlb64]

Absent any IRS/plan guidance, I don't see the risk of disregarding earnings and just accepting the participant's withdrawal request of the excess amount. The amount will be paid prior to 4/15 which I would think avoids the double taxation.