Late deferral change election correction

[lradimer]

I could use some input on how to correct this unique situation please...

An employee was deferring pretax $750 per paycheck and submitted a request on 3/15/16 to change the election to $350 pretax and $10 roth. The change was not actually implemented until 10/31/16.

The employee confirmed that they would like the contributions returned.

Would you return $390 per paycheck and recategorize $10 as roth and have the client fix payroll to add $10 of her pretax as taxable wages since a 1099 will be issued for the $340 being distributed?

Any suggestions?

[Mike Preston]

People tend to not respond when facts are confusing. It looks like you meant to say $390 not $340.

Assuming you meant $390 your inquiry makes sense, although I disagree with your premise that "a 1099 will be issued" because since this correction takes place all within a single calendar/plan year I don't see where a 1099 is called for.