Excess Deferral Refunded Before Year End

We prepared a preliminary adp test for a client since their test failed last year. Based on this test, the HCE has contributed about $4000 too much. Can this amount be sent back to the employer then have the HCE's pay corrected on the payroll end? 

Can you tell that I work for a payroll company?

You would "send back the money" based on what?  The preliminary adp test?

Nah, I wouldn't go down that road.

My recommendation would be to have the employee stop their deferrals for 2017 and see where the chips fall.  Is the employee over 50?  Maybe most of the 4k can be recharacterized at testing time. 

Hopefully, after 2 years worth of data, you can come up with a deferral strategy that will be close to passing.  A refund after getting max deferral is not the worst thing in my opinion.  I just don't want to see a 4,000 refund....

and what if the  preliminary test is wrong and you "sent back" too much? 

I agree with stopping/slowing  further deferrals to minimize the refund and to let the HCE know that he will be probably be getting some refund after actual ADP/ACP testing .  But there is no reason to "send it back" now and many reasons to not do so.  This is not a mistake/error that you just send back through payroll.  The plan needs to follow the participant's deferral election and take the proper steps going forward.

just to make sure on the terms

excess contribution is failure of ADP test, which, based on your notes is what you are referring.

excess deferral would be someone going over the deferral limit for the calendar year.

13 hours ago, coleboy said:

Can you tell that I work for a payroll company?

Yes 

Good Luck!

Simple answer:  NO.

You can't  "fail" the ADP test  until you have the necessary information which REQUIRES year end info for all participants.  It is that simple.  Stopping deferrals now in anticipation of a problem is fine; refunding would be a violation of all kinds of things.

NO.  The law prescribes how to handle this.  Retroactively manipulating the payroll is not one of the options.