Ineligible employees allowed to participate in error

[jpokusa]

Should an employee who has not met the eligibility requirements who is allowed to defer be included on line 5c?

[K2retire]

How will they be correcting the error?

[jpokusa]

Refund it as an excess contribution.

[ESOP Guy]

Will adding them put them so they now need an audit? If they are going to get an audit either way or not need an audit either way my deep down opinion is stop over thinking it and do what seems reasonable. I just have never seen an IRS or DOL audit of a 5500 focus on the counts when it is clear an audit isn't at stake.

If there is an audit handing on the question then it is tougher. If the excess is going to be refunded I would lean towards not counting them but it might be one of the few times I would get a legal opinion on a 5500 count.