Excess Deferral Ordering Rules

[tuna524]

All,

Thanks in advance for your help. EPCRS has clear ordering rules for correcting excess allocations. See 6.06(2). When a 415 failure is attributable to both employer contributions and elective deferrals, unmatched after-tax employee contributions and unmatched elective deferrals are reduced first. However, these rules do not seem to apply to the correction of excess amounts. My question is does anyone know of any ordering rules when making corrective distributions of excess deferrals (i.e., Roth before Traditional or LIFO or unmatched before matched)> Neither EPCRS or Treas. Reg. 1.401(g)-1(e) seems to provide for anything other than making sure it is "reasonable."

Thanks again!

[Tom Poje]

I think in most cases it is up to you, at least in the case of Roth vs traditional deferral (of course maybe your document is hard coded otherwise)

(The following is for ADP corrections, though I would think similar logic applies for excess deferrals) the FT William master document has

 

(4) Refunds. If the Plan permits Roth Elective Deferrals, the Plan Administrator shall determine the ordering rule for refunds of Elective Deferrals made as a result of any testing failure; provided that such ordering rule is nondiscriminatory.

Such ordering rule may provide that the Participant may elect to have refunds made either from his Pre-tax Elective Deferrals or Roth Elective Deferrals or any combination thereof.  

oh heck as long as it copied I will include:

CCH INCORPORATED, DBA FTWILLIAM.COM 40 Copyright © 2002-2015

 

As for the calculation of gains attributable “ …the sum of allocable gain or loss for the plan year…”1.401(k)-(2)(b)(2)(iv)(A)

Or the alternative method speaks of “…beginning of year …” as well 1.401(k)-(2)(b)(2)(iv)(C)

 

There is no mention of “Calculate gain from date of deferrals last deposited”. “Any reasonable method may be used for calculating gains 1.401(k)-(2)(b)(2)(iv)(B) but since both A and C speak of plan year, or beginning of plan year I don’t see that as saying Last deferrals in first deferrals out.