Correction or corrective distributions of excess aggregate contributio

[John A]

What is the proper procedure for making corrective distributions due to ACP test failure when match contribution has not yet been deposited? An employer has decided to make a discretionary matching contribution, and the match formula is defined in the plan document. The employer is planning on depositing the matching contribution after March 15. The ACP test fails and will be corrected through corrective distributions of the excess aggregate contributions. The employer would like to refund the excess aggregate contributions (match) before March 15. A few questions: 1) Can we safely assume that no earnings will be involved since the match has not yet been deposited? 2) Is it possible to make the actual deposit of match net out the excess aggregate contribution amount, so that the excess aggregate contribution amount is never deposited? 3) Can the employer refund the excess aggregate contributions from current match account balances before March 15, even though the match involved in the calculation has not yet been deposited?

[Guest mo]

My vote: yes, no, yes.

I have had occasion where the match receivable is the only matching funds the person has. In such cases I've had the employer go ahead and fund the match just for such individual(s). Or, if forfeiture credits are being applied, I've used that. However, there is a potential operational discrimination issue since you are funding HCE's prior to others. (I think netting is explicitly prohibited by the regs.)