401(k) Catch-Up Fiscal Year Plan

[Guest geschaft]

I am confused on the impact of an ADP test failure and catch-up recharacterization on future salary deferral contributions.

A 401(k) plan year ends on 9/30/06.

For calendar 2005 - the deferrals for an HCE (over 50) were $12,000. -

Also no catch-up due to ADP testing from the 9/30/05 Plan Year

For the period 10/1/05-12/31/05 deferrals for an HCE were $3,000.

For the period 1/1/06-9/30/06 deferrals for an HCE were $15,000.

For the plan year ending 9/30/06 the ADP test is failed and the maximum allowable deferral for testing is $13,000. Of the $18,000 deferred for the plan year $5,000 will be recharacterized as catch-up for 2006.

For the period 10/1/06-11/30/06 the participant has deferred another $5,000. Since he has already had $5,000 recharacterized as 2006 catch-up, how would these additional deferrals be treated? Would they need to be returned to him as excess contributions, if so, by what time, or could they remain in the plan since the total calendar year deferral remains under $20,000?

Can the deferrals be characterized as follows?

Non-Catch-up contributions from 1/1/06-9/30/06 - $10,000

Catch-up contributions from 1/1/06-9/30/06 - $5,000 - ADP test failure

Non-Catch-up contributions from 10/1/06-12/31/06 - $5,000

[Mike Preston]

Can the deferrals be characterized as follows?

Non-Catch-up contributions from 1/1/06-9/30/06 - $10,000

Catch-up contributions from 1/1/06-9/30/06 - $5,000 - ADP test failure

Non-Catch-up contributions from 10/1/06-12/31/06 - $5,000

Looks right to me.