Earnings on ADP refund

[BG5150]

Since gap earnings are not applicable for 2oo8, how would you figure out earnings on an ADP refund in this case:

HCE puts in full $15,500 deferral from last paycheck of the year. Pay date is 12/28 and the deferrals are on the 2008 W2. However, the deposit to the plan is not made until January 5.

HCE is due a gross refund of $3,000. How do you figure out the earnings on that? None whatsoever, since everything was deposited in '09, after the plan year ended?

[Hypothetically.]

[rcline46]

What if he made 2 deposits with the last as you said? 12? 24?26? 52? I would still calculate the earnings in the same fashion in all cases. If the client is willing to provide regulatory support for any other interpretation and issue a hold harmless letter to me, then I might do something else.

[Tom Poje]

1.401(k)-2(b)(2)(iv)(B) indicates a plan may use 'any reasonable method for computing income...'

I think most people follow

1.401(k)-2(b)(2)(iv)© which gives a formula, but really makes no sense if deferrals were not deposited throughout the year

(interesting, though. you simply want to refund 3,000. since most accounts lost money, I'd think using the formula would result in less of a distribution)