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Corrective Distributions for 3 Plan Years


pixiebear

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We have a 401(k) plan in which we need to make a corrective distribution to an employee who made 401(k) deferrals in 2021, 2022 and 2023 but we have now determined was not eligible to make the 401(k) deferrals to the plan in those years. I understand that we have to calculate the gains on those deferrals and include them in the distribution but does each year's correction need to be reported on a separate 1099-R for that year or would the entire corrective distribution be reported on a 2023 1099-R?

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If this is a nonhighly compensated employee, you should also consider a retroactive amendment under EPCRS to include this employee. Lots of details. Might or might not work out for you. I am raising this only because I wanted to make sure you were aware that this might be an alternative solution.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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