early inclusion

[Beemer]

A client let an employee into the 401(k) plan in 2011, before their 1/1/2012 entry date. They don't want to change the plan provisions. They want the employee to take a distribution to correct the error. How would this appear on a Form 1099r?

Thanks for any input

[ETA Consulting LLC]

You know, I used to fix this by having the employer correct the employee outside of the plan, and offsetting the employee's balance (at least the contribution portion) with a payroll.

That was prior to the 2008-50 rules. I am not sure if that would be an appropriate fix, but it would certainly place the plan in the same position had the error not occured.

Good Luck!

[Beemer]

What did you do with what was contributed into the account?

[ETA Consulting LLC]

Used it to offset the next payroll. This was typically done during the same year, where the annual totals for the employer would balance the deposits to the trust. This could remain in option, even across year if the employer is contributing a discretionary profit sharing. The primary objective is to avoid throwing something else out of balance when trying to fix the first thing.

Good Luck!