Correction Methods for Excess Deferrals

[Guest gaham]

A participant has made an excess deferral into the

employer's 401(k) plan for the 1999 plan year which

was just discovered. If a corrective distribution is

made now, will the distribution be subject to the early

withdrawal penalty assuming the participant is not

59 1/2 and is still working? Both the statute and the regs. seem to provide

that Sec. 72(t) does not apply but only when the correction

distribution is made on or before April 15 of the year

following the year the excess deferral was made. I am also

concerned that Reg. Sec. 1.402(g)-1(e)(8)(iii) says that

a corrective distribution made after the correction period

must satisfy 401(k)(2)(B). Does this mean that if the

participant is still working and is not 59 1/2, the cor-

rective distribution cannot be made?

[R. Butler]

Should be correctable under SVP. See Revenue Procedure 2000-16, Appendix A .04