Incorrect ACP Refund

[Guest KJNFLA]

Hello! A plan failed ACP testing, the HCE got a corrective refund. After the refund was received, we discovered they were tested using incorrect Match, after correcting the Match & retesting, they pass ACP testing. I realize the participant will need to give the $180 back to the plan, but any advice on how this affects his personal tax return since he reported it as income?

Thank you!!

[Bill Presson]

Hello! A plan failed ACP testing, the HCE got a corrective refund. After the refund was received, we discovered they were tested using incorrect Match, after correcting the Match & retesting, they pass ACP testing. I realize the participant will need to give the $180 back to the plan, but any advice on how this affects his personal tax return since he reported it as income?

Thank you!!

The 1099 would need to be corrected. He could file an amended return, but would probably need to make a decision on the cost of amending v. lower tax on $180.