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If I return deferrals based on an ADP failure, does the match contribution have to be recalculated based on the corrected deferral amount?

Feb 05, 2013 by Sharon from Grand Rapids, MI in  |  Flag
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5 votes

Yes, those are the rules. Where's the free lunch, right? :)

Comment   |  Flag   |  Feb 05, 2013 from Berwyn, PA

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5 votes
Peter C. Karp Level 20

Sharon,

The simple answer is.... the match related to the returned deferral is forfeited and may be used to reduce an additional employer match.

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Comment   |  Flag   |  Feb 05, 2013 from San Francisco, CA

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Yes. You should re-test. And be sure to distribute the corrective distributions before April 15 to avoid double taxation. If distributed after April 15, the excess is still taxable in the year the deferral was made and it is also taxed in the year of distribution. In order to avoid double taxation, it is imperative that plans refund excess deferrals to participants by April 15.

Comment   |  Flag   |  Feb 08, 2013 from Delray Beach, FL

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