415 failure - EPCRS

[fiona1]

A participant exceeds the 415 limit by $88.00. According to 6.02(5)(e) of the EPCRS..."if the total amount of an Excess Amount with respect to the benefit of a participant or beneficiary is $100 or less, the Plan Sponsor is not required to distribute or forfeit such Excess Amount. However, if the Excess Amount exceeds a statutory limit, the participant or beneficiary must be notified that the Excess Amount, including earnings, is not eligible for favorable tax treatement."

I know that this section applies to 415 corrections - so the $88.00 does not need to be refunded to the participant. But I'm a little confused on the last part regarding favorable tax treatment. Does this mean that the participant cannot roll this $88.00 over? When this participant eventually takes a distribution from the plan - does this $88.00 (plus earnings) have to be treated differently?

It almost seems easier to just pay this money out rather than fool around with earmarking it as "not eligible for favorable tax treatment".

Thoughts?