wifrbr Posted January 30, 2020 Posted January 30, 2020 Hello, I have an HCE who mid year started to make employee contributions. The documents states HCE's can not participate. I know I need to refund them their contributions, my question is we are refunding the 2019 contribution in 2020, do we treat this like a 402g refund and the 2019 contribution would be taxable in 2019 and earning in 2020, or is everything taxable in year of distribution, 2020
Bri Posted January 31, 2020 Posted January 31, 2020 I think if you want this as 2019 earnings, you'd have to re-do his W-2. Otherwise you're getting a code E on the 1099 for the EPCRS correction, and it's taxable in the year of distribution. The guy didn't exceed the 402(g) limitation, but rather the plan's own limitation ($0, since ineligible).
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