402(g) excess with 2 employers, but a common owner.

[R. Butler]

Person Z owns 100% of Company A and 5% of Company B. There are no controlled group or affiliated service group issues. In 1999 Person Z defers $10,000 into Company B's plan and $10,000 into Company A's plan. Is Company A deemed to have notice of the 402(g)excess by virtue of Person Z's ownership? If it is we must distribute, if not we can't distribute.

[actuarysmith]

I have dealt with this issue in unrelated plans, but not where there is an ownership overlap. At the risk of being "the first penguin in the water" I would say that the ownership overlap does not mean that one plan would have / could have / should have given notice to the other plan.

There are many situations where the "owner" has no knowledge of the day to day activities of the businesses. further, each company probably uses different payroll services, and has different personel handling payroll internally.

The prototype document that we use (corbel) says that it is the participants responsibility to notify the plan sponsor about the issue. If the plan sponsor is not notified by a certain date, then the excess cannot be removed from the plan, but the participant is still taxed (twice).