ADP Refunds for Fiscal Year Plans

[Guest swanson]

When a fiscal year plan does not pass the ADP test, which year is the refund taxable in? Is it the calendar year that the fiscal year begins in?

[Tom Poje]

if my memory serves me correctly the answer to this question changes for plan years begining 1/1/08 because one will be taxed in the year of distribution.

but as for your answer, see 1.401(k)-2(b)(2)(vi) tax treatment of corrective distributions.

if made within 2 1/2 months of plan year end, then they are treated as deferrals being 'the first elective contributions for the plan year'. in other words, First in first out. thus they would be taxed in the year the plan year begins rather than ends.

stupid rule, than heavens it will soon disappear. (OK, maybe I am in a minority feeling that way. ha)