Corrective Distributions

[Alex Daisy]

Can someone shed some light on the proper way to reflect ADP Corrective Distributions on a 5500.

Facts: 2007 5500, Plan failed 2007 ADP Test, Paid out $2,500 ADP Refund on March 15, 2008.

Should $2,500 be reflected as a Benefit Claims Payable on 2007 Schedule H?

Should $2,500 be deducted from Partcipant Contributions on 2007 Schedule H?

Should $2,500 be reflected as a Corrective Distribution on 2007 Schedule H?

Any help and insight is greatly appreciated.

[WDIK]

Assuming we are talking about a calendar year plan, how about reporting $2,500 on the 2008 Schedule H, line 2f (for corrective distributions paid during the plan year). [see instructions for line 2f.]

[Below Ground]

I agree with WDIK. Long ago (in the 80's) I thought you should do something for the reporting of the "year of failure". Let's just say that the KISS Principle wins again! On face value, the instructions for 5500 are clear (sure they are!). Besides, why complicate the issue.

[Alex Daisy]

Assuming we are talking about a calendar year plan, how about reporting $2,500 on the 2008 Schedule H, line 2f (for corrective distributions paid during the plan year). [see instructions for line 2f.]

Yes, we are talking about a calendar year plan, and I am doing this 5500 on the Accrual Basis. Since it is on the Accrual Basis, I thought that the Corrective Distributions must be reflected in the year that they were actually for. In this case, 2007, even thought they were paid in 2008.

Can I reflect the distributiions as a Liability on the 2007 Schedule H line 1g, and also as a corrective dist on the 2007 Schedule H, line 2f? Even thought they were not actually paid in 2007, since we are using the accrual basis, can I reflect it as if they were paid in 2007?

[Guest SWH]

Report on 2008. Technically, the sponsor has other avenues to correct other than distributions. For example, they could do QNECs. (Plus, I'm almost positive that the instructions say to report in the year of distribution. )