nancy Posted January 23, 2020 Posted January 23, 2020 I have a participant who exceeded the $56,000 limit in 2019 due to employer contributions. He made both Roth and pre-tax deferrals for a total of $19,000. Does the refund of the deferrals need to be prorata or can he elect to have the Roth distributed? This is his first Roth year so the earnings would be taxable.
Lou S. Posted January 23, 2020 Posted January 23, 2020 What does the document say? If not addressed what do the Administrative Policies say? If not addressed in Administrative Policies, now would be a good time to set and document them for now and the future. If you do allow election, it would be good to also have default order if election is not received timely enough to meet IRS deadlines. DMcGovern 1
JackS Posted January 23, 2020 Posted January 23, 2020 Unless the employer allcoation is a fixed required contribution, limit his employer allocation, transfer the excess out of his account (I assume it was depsoited during the year otherwise you would have done this when calcualting his allocation) and reallocate it to the other participants. Carike 1
nancy Posted January 24, 2020 Author Posted January 24, 2020 The document states that deferrals are returned when there is an excess annual addition. I'm just trying to determine if the refund should be Roth, pre-tax or a combination.
Luke Bailey Posted January 24, 2020 Posted January 24, 2020 The regs allow the plan to specify either, and the DC LRMs have language for this. The plan document should address, either hardwire one or the other first (or pro rata) or say that will be determined under uniform policy of plan administrator. 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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