Erroneous Automatic Contributions

[Guest Astro]

The Pension Protection Act authorizes plans to allow the withdrawal of automatic contributions without an early withdrawal or other penalty provided certain requirements are met. Those requirements are not the subject of my question. Assuming all the requirements are met and a participant elects to treat the contributions made within the first 90 days after the date of the 1st elective contribution as an erroneous contribution, my questions are:

1. The Joint Tax Committee Report states that such amounts are generally treated as a payment of compensation, rather than as a contribution to and then a distribution from the plan. Does this mean that we pull the amount back into the W-2? If yes, what about earnings - do they get reported as compensation, too? Losses, do they reduce the compensation?

2. Can we take fees on the contributions that were made? Again, if reported on a W-2, do fees reduce the compensation that otherwise would have been reported had the deferral never occurred?

[Kimberly S]

We are anxiously awaiting IRS regs on that topic.

[John Feldt ERPA CPC QPA]

The 90-day "oops, give me a refund" - issue is not an option until 2008, so the IRS might not give us guidance until sometime in 2008 for the tax reporting due 1/31/2009!