I have a 9/1 plan year. For the 2003 calendar year, I have an HCE that had a $2,000 excess deferral that never got paid (now an operational defect). That HCE had an ADP excess contribution for the 9/1/03 - 8/31/04 plan year of $3,000. The $3,000 was paid on 10/1/04 (before 2-1/2 deadline).

Can I offset the ADP excess to satisfy the excess deferral that never got paid?

I assume this can be done in accordance with 1.401(k)-1(f)(5)(i)(B). I see the tax reporting as: $2,000 excess deferral taxable in current tax year (2004) and $1,000 ADP excess taxable in the prior tax year (2003).

Thanks.