Forms of Correction

(1) In general, a disqualified person corrects an excess benefit only by making a

payment in cash or cash equivalents to the ATEO equal to the correction amount. See Treas. Reg. 53.4958-7(b)(1).

(2) Promissory Note - A cash equivalent doesn’t include a promissory note.

(3) Anti-Abuse - A disqualified person won’t satisfy the correction requirements if the

disqualified person engaged in one or more transactions with the ATEO to circumvent the correction requirements so that the disqualified person effectively transferred property other than cash or cash equivalents. See Treas. Reg. 53.4958-7(b)(2).

(4) Nonqualified Deferred Compensation - The disqualified person may correct the

undistributed benefits, by relinquishing any right to receive such benefits and any earnings on those benefits, if an excess benefit transaction results from the vesting of benefits under a nonqualified deferred compensation plan. See Treas. Reg. 53.4958-7(b)(3).

(5) Return of Specific Property - With the agreement of the ATEO, a disqualified

person may make a payment by returning the specific property previously transferred in the excess benefit transaction. The return of the property is considered a payment equal to the lesser of the fair market value of the property on the date when it’s returned to the ATEO or the fair market value of the property on the date the excess benefit transaction occurred. See Treas. Reg. 53.49587(b)(4).

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a. Insufficient Payment - If the payment resulting from the return of the property

is less than the correction amount, the disqualified person must make an additional cash payment to the ATEO equal to the difference. See Treas. Reg. 53.4958-7(b)(4)(ii).

b. Excess Payment - If the payment resulting from the return of the property

exceeds the correction amount, the ATEO may make a cash payment to the disqualified person equal to the difference. See Treas. Reg. 53.49587(b)(4)(ii).

c. Nonparticipation - Any disqualified person who received an excess benefit

from the excess benefit transaction may not participate in the ATEO’s decision whether to accept the return of the specific property. See Treas. Reg. 53.4958-7(b)(4)(iii).