ADP refunds, Pre-Tax,a dn ROth Deferrals

[buckaroo]

Recently, we received a revised election form from an attorney who added a section to ask any HCE participant how they wanted to have any possible ADP test failure refund taken from their account. THe three options provided were:

All Pre-Tax then Roth (if necessary)

All Roth then Pre-Tax (if necessary)

Proportionally out of both

I have reviewed our plan documents and it states that the refund can be taken out in any way the administrator sees fit. My questions are as follows:

Does the choice have to be a formal amendment to the plan (I think no)?

Can we also add the choices above to our forms?

Do we HAVE TO add the above choices to our forms?

What criteria (if any) should the Administrator use to choose how to process the refund?

Can the Administrator pick a different method each year? (FOr 2006, All ROth. For 2007, All Pre-Tax.)

Can the Administrator pick a different method for each participant each year? (Mr. A does all Roth and Mr. B does all Pre-Tax.)

How often can the Administrator Switch?

Is there anything else we should be aware of when reviewing the refunds?

[Tom Poje]

you might want to look at

http://www.irs.gov/retirement/article/0,,id=152956,00.html

actually some very good q and a on Roth 401k

in particular the section on distributions. I believe you have to include some of the distribution as income since it is not qualified if you go via Roth.

[Appleby]

Hi Tom,

I sent you an e-mail just now. If you did not receive it, please let me know ( not related to this post).

Denise