Taxation of 415 Refunds (Posted November 8, 2002) Technical Tip 84:The following question and answer were from the IRS Q&A Session at the 2001 ASPPA Annual Conference: If a participant has to take a distribution of deferrals in 2001 to avoid a 415 limit violation for the 2000 plan year, do the same rules of before 3/15 and it is income 2000 and after 3/15 it is income for 2001 and a 10% excise tax apply? Response: Revenue Procedure 92-93 makes it clear that it is always taxable in the year received. Comment by RLR&C ERISA Attorneys: Treas. Reg. § 1.415-6(b)(6)(iv) permits a corrective distribution of elective deferrals to be made to a participant to correct the allocation to a participant's account in excess of the § 415 limit. Revenue Procedure 92-93 makes it clear that the § 415 corrective distribution is always taxable in the year received and that there is no excise tax on the distribution. This is in contrast to the rules for corrective distributions for failing the ADP and ACP tests (to which the question seems to be referring). ADP/ACP corrective distributions are included in income in the prior year (i.e., the year of deferral), if they are made within the first 2 1/2 months after the end of the plan year (March 15th for calendar year plans), but are included in income in the year received if they are distributed after the first 2 1/2 months. Additionally, a 10% excise tax applies if the corrective distribution is made after the first 2 1/2 months but not if it is made within the 2-1/2 month period. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.