My company's 401(k) plan administrateor just sent me a refund of a portion of the money I had put into the 401(k) plan in 2007, saying that the company had failed to meet the non-discrimination tests for highly-compensated employees (HCEs). The check includes the portion of my original withholding that they are returning, plus a small amount of earnings on it. My question is: how do I report this on my 2007 taxes? I think the answer is that I add the portion that reflects the return of my contribution to Wages and Salary on Form 1040, but not include the earnings portion until I do my 2008 taxes next year. I have not received a 1099-R for this distribution, and from what I understand won't be getting one until January 2009. Do I have this right?

Sounds right to me. The amount was withheld PRETAX, so no taxes were withheld and they weren't included on our W2 your as taxable income.