returning excess allocations

[Guest nynaeve]

I have a situation where a participant has deferred more than the 25% document limit.

If I am reading Revenue Procedure 2008-50 correctly, we would return this to the participant on a 1099R along with the earnings, and notify the participant that the distribution is not eligible for rollover. In addition, this would not be subject to the 10% penalty.

I also see that we would not include this in testing at year end.

I have some questions regarding this process:

1. Do we use this in all cases, or only if it crosses a calendar year? Is it ever appropriate to correct for a current year using a negative payroll adjustment?

2. If this process is used for current year corrections, I would assume that the W2 is not corrected?

3. Is there a good list somewhere that would list the appropriate situations to correct using this method? Perhaps it is contained with the revenue procedure and I just am not catching it.

4. Can we use the DOL calculator to calculate the earnings? What if there is a loss?

I'm sure I am missing something. Any help would be appreciated.

Thank you.

[Tom Poje]

Rev Proc2008-50

6.02(4)(e) notes that in a DC plan a corrective contribution or distribution should be adjusted for earnings (including losses) from date of failure

6.02(5)(a) notes that the Online Calculator can be used (but only if the probable difference ...is insignificant...or admin cost..If it is not feasible to make a reasonable estimate...etc.)

while somewhat old, this was an answer provided years ago - the general thought being the correction is somewhat similar to a 402(g) failure

http://benefitslink.com/modperl/qa.cgi?db=...ects&id=107