ACP failure on 403b plan

[Guest Peggy806]

I read somewhere that the refund due date for ACP failure of a 403(b) plan was the end of the next plan year rather than 2 1/2 months after the end of the year. Is that correct?

[PensionPro]

If the refunds are made after 2 1/2 months the excise tax is due.

[Guest Peggy806]

If the refunds are made after 2 1/2 months the excise tax is due.

That is what I thought, but the article I read said they were due by the end of the next year. I thought the article was wrong. Thanks for clarifying this.

[ESOP Guy]

I am not a 403(b) expert, but I believe there is a confusion going on here. There is the deadline to make the refunds to avoid the excise tax, 2.5 months. And there is another deadline to simply get the refunds made, end of the following plan year. There are two different deadlines. I just can’t remember what happens to the plan if they fail to get the refunds made by the end of the following plan year.

The few 403(b) plans I have worked on never fail to make the refunds timely.

Although if someone wants to tell me I am wrong feel free.

[PensionPro]

Refund before 2 1/2 months no excise tax. Refund after 2 1/2 month 10% excise tax. Refund 12 months after plan year end, the plan will fail to meet the requirements of section 401(a)(4) for the plan year for which the excess aggregate contributions were made and all subsequent plan years in which the excess aggregate contributions remain in the trust.

[Lou S.]

My understand is if you don't make the refunds by the 12 months dealline, you need to make a correction under EPCRS to correct which generally requires the plan sponsor to make some sort of QNEC/QMAC type contribution to correct the failure.