Deferrals in excess of plan limit

[PAL]

Sorry, I know this was discussed in Aug - Sept (http://benefitslink.com/boards/index.php?showtopic=39608&hl=excess+amounts) but I want to discuss a little further since I've now run into the same thing. Several participants have made deferrals that are under the 402(g) limit but greater then the 15% plan limit. None are eligible for CUC.

The previous discussion talked about retroactively amending the plan for the higher deferral % using VCP. But, if you do that, does it present you with an even greater compliance issue in relationship to those 300 other participants who were not given the opportunity to participate at a higher %? Under 2008-50, section 6.06, can the amount be refunded and treated as taxable in the year of distribution?

Thanks.

PAL

[WDIK]

But, if you do that, does it present you with an even greater compliance issue in relationship to those 300 other participants who were not given the opportunity to participate at a higher %?

How many of the other 300 were deferring at the 15% plan limit level?

[PAL]

I don't know. Would you agree then that, a least for the people who were at 15% and didn't get to elect more, there could be an issue?

Do you see any way that this could be distributed as an excess amount that is taxable in the year distributed?

[Richard Anderson]

Are the affected participants NHCE? If so, then it should be OK for the plan to be amended retrocatively to say Participant A and Participant B only can defer XX%.

[K2retire]

Since the employer apparently is consistently not enforcing the 15% limit, could an argument be made that the other 300 could have exceeded it too?

FWIW, sounds like it's time to remove the limit!

[PAL]

Thanks for the feedback. They only had a few people that were in excess of the 15%, 4 HCE's an 1 NHCE (HCE in following yr). There were many more, both HCE and NHCEs that were at the 15% max (about 20 total). So I'm back to asking if they can distribute under 2008-50?