Late ADP refund

[Guest padmin]

401k plan fails ADP test for 2004. We are attempting to correct under SCP by the deadline of 12/31/07. If the HCE who should have had the refund terminated in 2004 and received a distribution in 2004 does that satisfy the refund. Is the refund deemed to have occured as long as it happens within 12 months of the plan year end failure ? We are trying to minimize the corrective QNECs required under EPCRS.

[JanetM]

I don't think so. Corrective distributions are not eligible for rollover. Would guess the HCE did rollover not cash out.

[rcline46]

If this had been corrected in 2005, and the HCE did a rollover, then part of the rollover would have to been disgorged as an impermissable rollover, but that is NOT the plan's problem! I would think notifying the participant, sponsor and rollover destination of the impermissable rollover and issueing coreected 1099-R forms for 2004 (since it was distributed prior to 3/15/2005) is the only correction needed.