415 Excess

[justatester]

Hi,

We have a plan that has 415 excess? The match formula is 50% up to 100% of deferrals. (very generous these days!) A participant has $500 excess. If we return the $500 plus ATM of $250, I believe we have over corrected? Or would you correct $333.34 in deferrals and $166.66 in match?

Any insight would be greatly appreciated.

[Tom Poje]

EPCRS is pretty specific, or so I thought. section 6.06(2)

first return unmatched deferrals.

then return deferrals that were matched and forfeit that corresponding match

[Guest jims]

I've seen it done so you would have $333.34 and 166.64 which totals $500. If you return $500 and $250, you are returning $750. You could argue the amount over $500 is an impressable distribution. If you recalculate 415 with the $750 return, you'll see you over corrected. I don't remember a cite, but was probably a Rev. Proc. a few years back.