401(a)(17) excess contributions corrected under SCP subject to 4972 excise tax?

[jkharvey]

When an employer self corrects an error of matching contributions calculated on compensation in excess of the 401(a)(17) limit, are those amounts subject to 4972 excise tax?  I don't find this addressed in the EPCRS Revenue procedure.  I have never had an IRS auditor ask for this on audit, but someone else in my office is asserting that we do need to compute and pay the tax on a 5330.

 

Thank you

[Bri]

Is the contribution non-deductible specifically, because it's over the 404 limit, or is it just non-allocable to the participant in question?  Could the amount be re-allocated to other participants in one form or another?

[Luke Bailey]

I did a VCP years ago to correct a systematic failure to apply 401(a)(17), and the issue never came up. I think I agree with Bri that the issue is not nondeductibility. 401(a)(17) is a qualification issue. If the not corrected, the plan would be disqualified and all contributions would be deductible, or not, depending on whether vested.