Challenge: How to fix deferrals that should not have been made

[RayJJohnsonJr]

I'm looking for an imaginative solution. In the 401(k) we manage (Acme Widgets) there are 2 owners, their sposes, and 2 unrelated employees. All employees defer into the 401(k) since inception in 2006. Here's the problem: one of the spouses made $8,333 deferrals in both 2007 and 2008. She also made deferrals into a 401(k) Plan ata bank she also works at if $15,000 in 2007 and 2008. We just fouk this out. She is under age 50.

Can anyone think of a corrective action that has the least adverse consequence?

Thanks to anyone who can come up with a good solution.

[QDROphile]

I think the consequences and the corrections for excess deferrals are pretty well established and a quest for an "imaginative" alternative solution is destined for either frustration or illegality.

[Bird]

I agree, there's not much you can do now but leave it in. It's not the plan's problem.

This should have been picked up when she prepared her taxes each year. I don't know if there was a reporting problem on the W-2s or it just wasn't noticed; I would think the IRS has a system for catching excess deferrals and would have found it by now, so it does make we wonder if the W-2s were correct. Or, if she was a partner and took the deduction on her 1040, it's very likely that no one would know any better...and that, if the returns are not amended, that it will never be known.