DMcGovern Posted February 25, 2011 Posted February 25, 2011 Large plan just completed the ADP test for 2010. Test fails and they have done corrective distributions to all but one HCE. This particular HCE recently took out a loan and hardship withdrawal that zeroed out his account balance, so there are no current funds available to make the corrective distribution. I know they would have until the end of 2011 to make the distribution. Loan payments for the rest of this year may not be enough to cover the full distribution amount. I'm not finding any regs on how to handle this - anyone else have this situation? Any IRS Q&A that would be similar? Thanks!
rcline46 Posted February 25, 2011 Posted February 25, 2011 Re characterize the hardship distribution - do 2 1099-rs. If under 59 1/2 then the corrective distribution will not be subject to the 10% excise tax.
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