SAR-SEP fails 50% participation test

[Earl]

What is the correction for a SAR-SEP that fails the 50% participation test? Seems to me that it is just not a qualified arrangement and all contributions for all participants are taxable.

Then correction. Just treat as an "ADP" failure? Refund by 3/15, include in 2000 compensation and report on 1099-R in 2001(Prior code)?

Or are amended W-2s required? Then earnings are taxed how?

[Guest Boilerburm]

Does anyone know the answer to this old question? I was just presented with a similar situation, and would like to resurrect the issue.

Thanks.

[Gary Lesser]

Treat all SARSEP contributions as W-2 wages for all purposes (and include the deferral amount in box 13 also). It is still in the IRA and is treated as now made by the individual (which, of course, is a prohibited excess contribution).