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In a general response to my post you wrote, Well, first, if the plan is disqualified, ALL of the participant/employees have consequences. ...

You honestly think the IRS would disqualify an entire 401(k) plan for failing to make a corrective distribution for an excess contribution it couldn't possibly have known about in the time allotted given the current rules?! Sir, you live in a seriously crazy, messed up world.

Also, Second, it's probably a career limiting move for any employee to "intentionally" jeopardize the qualification of the plan. Third, it is probably also a career limiting move if when changing jobs you lie to your new employer - who often (always, for my clients) ask if you've made contributions to another plan in that year, and if so, how much.

I doubt that too. If I'm wrong, I could just claim it was a mistake. Even if it's just a misunderstanding of how things work, it's still a mistake. But I don't think I misunderstand.

In any case no employer I've worked for has ever asked me such a questions in the past 35 years. Ever. And I'm on my 10th employer. [9th with a 401(k) plan.]

If your employers actually asked about these things, they're extremely unusual in my experience. Either that or you're just making up this entire line of argument.

And, Just don't do it. It's wrong. It has consequences to the plan, the employer, and ultimately to all employees and participants. Including terminating the liar.

I never once said to lie. I don't appreciate you suggesting I did. I just suggested that in some narrow cases it's worth taking what is usually considered a punitive penalty rather than report the excess contributions timely.

And in my experience no employer has every asked me questions about prior 401(k) plan contributions. Ever. If they don't ask and I've not been told to tell them and if the IRS has a proscribed penalty that falls squarely on me for failing to tell them timely, I don't see that this causes them any harm and I don't see it as a lie. It's just following the proscribed process … even if the outcome might not be quite what Legislature expected.

Finally, Sorry. I just don't buy (ever) "gaming the system" for one's own gain when clearly the intent of the law is to not allow for such scenarios - and it could entail consequences for others. As an employer, I would terminate immediately one who did something like that.

The law is just a set of rules. I always recommend following the rules. But I couldn't give a … about what you or anyone else thinks the intent of a law is. That is just an opinion and is completely irrelevant if I'm following the rules as they are written. A plain reading of the law by the affected party always trumps any re-interpretation.

And if you as an employer didn't provide me timely written notice of your company's specific reporting requirements, I'd likely sue you and drag your name through the press if you did fire me for it... Though I'm pretty confident you'd never actually find out about it in any case.

- Joel
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