Lynn Campbell
Jan 14 2003, 05:52 PM
This question relates to a pre-EGTRRA year:
If the plan provisions have a limit on deferrals (i.e. 15% of compensation) and the participant exceeds both the plan limit and 402(g) limit, which is corrected first? How does this work?
Tom Poje
Jan 15 2003, 07:01 AM
The individual will file a W-2 at tax time. One can't get around the fact the statement will say, for example, $12,000 in deferrals. Therefore, I figure the govt is going to say 'you have some excess deferral'. so I guess I would:
have fun with the 1099s.
excess deferrals in year they occurred, earnings in year distributed.
remaining contributions over the plan limit and earnings in year they occurred.
when you say the error occurred in pre-EGTRRA year I am not sure what year you are talking about. If you mean the error occurred before 2002, then ouch, because the person should have already paid taxes on the excess deferrals in the year they occurred and will now pay taxes a second time in the year of distribution.