Gap Period Income

[Guest PGH.ERISA]

Under PPA 2006, beginning in 2008 it is no longer necessary to include gap period income when correcting for ADP and ACP excesses. I have still not seen anything from the IRS interpreting whether this change is mandatory or not (i.e., whether plans can voluntarily continue to calculate and return gap period income even though it is no longer required). Has anyone seen guidance on this?

[Guest tmills]

The change was for plan years beginning after 12/31/07. Therefore for any plan year that began in '07, gap period income is still required on refunds. Since PPA changed the Code to limit the allocable income to income through the end of the plan year for which the contribution was made, they probably don't see the reason to issue guidance. Gap period is gone. However for most plans not until refunds made in '09 for '08.

[dmwe]

I think we'll see more guidance or clarifications here in 2008.

[Guest PGH.ERISA]

I think we'll see more guidance or clarifications here in 2008.

I have been told unofficially by the IRS that gap period income cannot be returned for 2008 and later plan years as part of an ADP or ACP fix. The apparent view is that giving it back would be an impermissible return, as PPA 2006 authorizes only the return of income for the year in which the excess arises.