Non-calendar year plan issues

[smm]

Client has a non SH plan with a 6/30 year end. ADP test is failed for pye 6/30/06. HCEs' deferrals made during the first 6 months of 2006 - no deferrals were made to this Plan by HCEs between 7/1/05 and 12/30/05. Question 1: If refund is made by 9/15/06, is refund taxable in 2006? Question 2: If answer to question 1 is yes, can HCEs "defer" the amount of the refund during the plan year that began 7/1/06 to enable them to defer the full $15,000 during 2006.