deminimis ADP correction???

[DMcGovern]

ADP Test fails and after reclassifying most of the correction amount as catch-up. Only 59 cents remains to be distributed. Obviously, it will cost a lot more to get this distribution processed than 59 cents.

I can't find anything that would allow me to not make the distribution. I have re-confirmed everyone's compensation and deferral amounts. No new employees this year.

Any thoughts would be appreciated. Thank you!

[12AX7]

I'm not aware of a de minimum rule. Is there a match in the plan that you can "shift" to pass ADP?

Edit: have you also considered possible investment loss to zero out the excess contribution?

[DMcGovern]

Thanks for the reply! Sorry, no match available and the participant had a gain on investments last year.

[BG5150]

Though I don't see any deminimus amount anywhere, I would not hesitate to do no refund in this case. If an agent is going to bust you for something like that, he or she will more than likely come up with something else, too.

[12AX7]

If there's no other opportunity to zero out the refund, I would bite the bullet and process the excess. What if the amount were $1.01? The point is for small amounts, it always costs more to process than the amount that gets distributed.

[Bill Presson]

The IRS typically doesn't even deal with cents. Are you sure there aren't some rounding options that would resolve the issue?

[Tom Poje]

if it is that close I would try testing on comp less deferrals (which includes cafeteria amts), though I guess if you used comp - plan deferrals only and passed the comp test you would be ok.

or if someone who deferred entered mid year use comp from DOP.

[Bird]

I would ignore it. Not look for testing options, etc.

[DMcGovern]

Thanks to all for the responses! There were no new employees this plan year and using comp less deferrals made the results worse, so I discussed the options with the client and they were happy to do the distribution (much better results than the prior year).