excess 415 for terminated employee

[Nancy D]

Hi all,

I have a 401k plan where participant terminated employment in early 2018 and received a taxable distribution in  2018.  His pre tax deferral, Roth contribution and match  exceeded his compensation for the year resulting in 415 issue.

In looking at EPCRS per our VS in 415 excess situation, it seems the correction is to distribute the funds plus earnings to him.  We already did this.  Client wants to self correct since the total excess is under $100. Am I missing something,  Is there anything we need to do other than document?

Thanks for any help!

 

[BG5150]

As long as the funds were not rolled over, I think you are okay.

[401_noob]

would you need to reissue 1099-Rs with corrected codes to show the regular distribution and the corrective distribution?

[Nancy D]

BG5150, that's what I was thinking, but it seemed too easy.  Thanks for responding.

401_noob -  Thanks,  I've reached out to the vendor and we'll  send them a correction form even with a zero balance, they'll send a letter to participant and their tax team will decide on corrected 1099-R if necessary.

Thanks much!

 

[Below Ground]

I assume you applied 100% of the refund to deferrals (Roth or Pre-Tax), since excess applied to Matching would not be distributed, but forfeited.  (The order should be in your document.)  In addition to what others have said, make sure Matching doesn't use the excess deferral distributed.

 

[Nancy D]

Thanks Below Ground.  Yes we'll correct on deferrals, pre tax as that will cover it.  The match calculation isn't affected as it is capped and even with reduction, deferrals are well over the maximum allowed for match.

Appreciate your help!