What happens if corrective distributions under the ADP test only provide amounts from pre-tax accounts?

The correct response addresses the requirement for reporting corrective distributions under the Actual Deferral Percentage (ADP) test. When corrective distributions involve amounts exclusively from pre-tax accounts, they must indeed be reported separately from post-tax amounts. This separation is necessary to ensure accurate compliance with IRS regulations and to maintain clarity in the tax reporting process.

When corrective distributions are processed, they aim to adjust the plan's contributions to stay within the allowable limits set by the ADP test. Since pre-tax contributions and post-tax contributions can have different tax implications, it's essential that they are tracked and reported distinctly. Pre-tax accounts typically affect taxable income during distribution, while post-tax contributions do not usually trigger additional tax upon distribution since the taxes have already been paid.

This separation helps avoid confusion for both the plan administrator and the participant regarding tax obligations and ensures compliance with federal tax regulations concerning retirement plans. Therefore, the requirement to report these corrective distributions separately from one another is sharply relevant in the context of $Qualified 401(k) Administrator (QKA) standards and practices.