Example. S is a 62 year old individual who participates in Employer Y's qualified cash or deferred arrangement. In January 1991, S withdraws $5,000 from Y's cash or deferred arrangement. From February through September, S defers $900 per month. On October 1, S leaves Employer Y and becomes employed by Employer Z (unrelated to Y). During the remainder of 1991, S defers $1,800 under Z's qualified cash or deferred arrangement. In January 1992, S realizes that S has deferred a total of $9,000 in 1991, and therefore has a $525 excess deferral ($9,000 minus $8,475, the applicable limit for 1991). An additional $525 must be distributed to S before April 15, 1992, to correct the excess deferral. The $5,000 withdrawal did not correct the excess deferral because it occurred before the excess deferral was made.
Employee | Compensation | Contribution | Actual deferral ratio (percent) |
A | $140,000 | $7,000 | 5.0 |
B | 70,000 | 7,000 | 10.0 |
C | 70,000 | 7,000 | 10.0 |
D | 45,000 | 2,250 | 5.0 |
E | 40,000 | 4,000 | 10.0 |
F | 35,000 | 1,750 | 5.0 |
G | 35,000 | 350 | 1.0 |
H | 30,000 | 3,000 | 10.0 |
I | 17,500 | 0 | 0 |
J | 17,500 | 0 | 0.0 |
26 C.F.R. §1.402(g)-1