This should be a 10% withholding by your 401k provider. Most plans have that as a default option in the case of a return of excess contributions. It might be worth a call to your 401k provider just to make sure that it was treated as a withholding, though, and not mistakenly treated as a 10% excise tax.
It sounds like your plan has too high of a percentage of highly paid employees contributing, compared to those considered non-highly paid. Rather than have the plan cap your wife's contributions based upon their nondescrimination test results each year, I would recommend having her contribute just enough to maximize any employer match and then put the rest in a Roth IRA.
Sounds like the wife was hitting the $17K maximum or some other high savings as a HCE while the lower paid employees were stashing a lot less away...UNFAIR!!!
Strange message this law sends: "We want you to save for your retirement. But there is a cap. And even with the cap, it needs to be fair in relation to everyone else's elective savings rate in your company. So save fairly."
I received a similar letter from our HR department last week but there was no explanation as to why I was getting some money back. You would think that it would make sense to include some sort of commentary outlining the reasoning. Once I got the explanation, I was able to understand the "why" but never knew there was that stipulation in the 401k regulations. Now I'm going around to my non-HCE friends to try and get them to up their 401k contribution so I can sock away more of my money!
EDIT: I guess I can take the excess that is given back and put it into my IRA so it's contributed towards the 2012 tax year, correct?
I got shut down last year by PayPal and had to sign some sort of online affidavit indiscating that I wouldn't use it to receive funds for any sort of gambling. Had to do this before they would unlock my account. Once it was unlocked, I pulled all of my money out (~$1000) and only use PayPal minimally. Screw them.
I just sent out the e-mail notifying all of my past participants about this years contests and also advised that I was no longer receiving payment via PayPal. Was looking for another option and saw Venmo mentioned above. Stupid name, but I'm thinking about offering it as an alternative option. Probably half of last years participants (100 total) paid via PayPal last year.
Interesting development at Everton. Jan Mucha makes his debut for the Toffees over Tim Howard. First time he has started an EPL game in the 3 years he's been with Everton. 210 consecutive matches for Howard before today's game. Howard was two games short of tying Neville Southalls 212 consecutive league appearance record. He was injured in this weeks 3-1 victory over Oldham in the FA Cup.
Everton up 3-0 vs. Reading. Mirallas, Pienaar and Fellaini with the goals.