401K Highly Comp refund due to Anti-Discrimination Test

[Country Living]

I have been notified our plan administrator is going to refund some of my pre-tax 401K contributions due to the out-of-balance on the anti-discrimination test. I just checked IRS Publication 525 and this refund will be considered income for the year 2005 since the distribution will be within 2.5 months of the end of the plan year.

My question is (and I can't seem to find this on the IRS website) - since I didn't use any of my catch-up contributions in 2005, can I request the plan administrator to flow the overage to the 2005 catch-up, therefore nullifying the refund?

Thanks.
Sandie in Texas

 

[cbg]

What does your plan document say?

 

[Country Living]

I don't have a copy of the plan and the plan administrator is not returning emails/phone calls.

Are you saying this is a plan specific situation (converting the refund to the "catch-up") and not covered by IRS directives?

Thanks.
Sandie

 

[cbg]

Yes, I am.

I'll have to check this when I get to work tomorrow but I'm not sure you can make 2005 catchups now that it's already 2006 anyway.

 

[cbg]

I double checked. In general, you cannot make 2005 catchup contributions any more, given that it is 2006.

However, IF your plan document allows for it, you MIGHT be able to have the funds in question reclassified.

 

[Country Living]

I have the answer!

CBG, thank you for pointing me to the plan itself instead of wasting my time with IRS regs.

I spoke to the plan administrator this morning and they are able to flow the overage to the 2005 "catch-up"; therefore, eliminating any 2005 tax implications for me.

You indirectly brought up an excellent point. I read the plan summaries each year and disregard the option to get the entire plan, which may be an all too common practice (or a lazy one.) From now on I will exercise the option to get a copy of the complete plan.

Thank you for your help!
Sandie