Excess Deferral for 2006

[Guest AJM 34]

I have a participant who is over age 50 and went over the 2006 402(g) limit.

His EE deferrals were $23,282.25, which includes a $5,000 catch up contribution. He is over the 2006 402(g) limit of $20,000 by $3,282.25.

Obviously, I missed the 4/15/07 deadline to correct the excess deferral plus earnings. Can I still do the correction now?

[JanetM]

You can still make the correction. You will need to file 5330 and pay excise tax on section 4979 excess amount.

[Tom Poje]

assuming the document calls for it, the answer is yes.

Appendix A .04 under EPCRS permits this. note ee gets taxed in 2006 and 2007 as well. double taxation.

If excess deferrals are a result of more than 1 plan or employer, then it is possible neither plan has a violation, and therefore no language to permit such a distribution, in which case ee is only taxed in 2006, and then again at distribution time.

[Guest AJM 34]

Tom:

I was under the impression that according to 1.402(g)-1(e)(8)(iii), excess deferral may only be disributed after 4/15 when there is a distributable event.

Does the possibility of Plan Disqualification count as a distributable event?

[Tom Poje]

I'd normally agree, but since EPCRS says this is an operational failure (after all, the document says you can't accept excess deferrals) then I would say you go by the self correction method listed. otherwise, why would they even have it in there as a possibility/suggestion?