402(g) limit

[Guest ars1]

What happens if someone excedded the 10K ee deferral limit for 1998 and was not refunded by April 15. I realize this a disqualifing event.

1.What are the remedies?

2.Is the refund taxable in 1999 or does the part. have to file a 1998 amended tax return.

3.I read a little about SVP (Standardized VCR Program), where and how do this process begin?

4.Is the plan administrator reposible for taking the corrected action?

Any guidance is very much appreciated.

[Guest]

appears this can be corrected under APRSC, so good news if you meet all the requirements under that program.

For 1998, the participant must include the excess deferral in gross income. The IRS knows this amount because it the total deferral appears on the W-2. (Of course, this doesn't mean the participant understands the rule, but nevertheless, they must report it) In other words, they may have to amend their 1998 tax form.

For 1999 they pay taxes on the total excess + earnings, and are issued one 1099R, use category code 8 to indicate it is a current year taxation.

So, participant gets taxed twice on the excess deferral (1998 and 1999) and once on the earnings (1999)

since the plan will be disqualified if no action is taken, certainly the administrator should do something.

[EGB]

See Rev. Proc. 98-22 and 99-31.

[Guest ars1]

After reading rev proc 98-22, the amount of the refund seems to be an operational failure to be corrected under APRSC. The amount of the refund is $180 and was caused by a miscalculation on the pa's part. It is my understaning that no paperwork to the service is required. Does this seem like a reasonable interpretation?

Thanks for all the help.