415 correction

[Guest nlamorte]

The plan that I administer is still updating processes to avoid 415 excess annual additions. So, we had about 15 participants exceed the 415 limit for the PYE 03/31/2009. Using the EPCRS, we instructed the Plan Administrator to process the necessary refunds. Almost all overages are due to the fact that the Plan allows for after-tax contirbutions, and until the IRS said these corrections are no longer allowed (excpet through EPCRS), the company did not proactively limit or monitor these contributions. Preferring instead to refund excess amounts with the annual compliance test (i.e. the population was so small it was not worth updating systems to monitor pro-actively). The plan provides that refunds are processed in the following order: 1) EE after-tax (voluntary contributions) 2) EE pre-tax (elective deferrals) 3) ER match 4) ER non-elective.

One of the employees who was due a refund of his after-tax contributions happened to request a withdrawal of a portion of his after-tax contribution account, according to the plan provisions.

Does anyone know if his withdrawal has any effect on his total annual additions? That is, should we have reduced the 415 refund for him since he withdrew from this same source during the allowable correction period?

[BG5150]

My guess is, since the 1099 has not been issued yet, you could just make sure it gets the proper code.

Was the initial withdrawal enough to satisfy the excess? If yes, you'd probably have to do two 1099's: one for the 415 excess and one for the remainder as a normal withdrawal. If not, you need to distribute the remainder and do one 1099.