Excess 401K contribution
Recently I discovered that I over contributed to my 401K plan. I had two separate employer and plan administor. When I discovered the excess contribution I contacted the plan administrator and was given the deadline of March 1 to make changes. I understand IRS deadline is April 15. What are my options if my plan administrator is not willing to remove or redistribute the excess amount? Is the plan administrator in violation of the IRS regulation? Are there documentations that holds the plan administrator responsible to correct the over contribution? Please help. Thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2018-03-23 22:05
A plan is only obligated to return deferrals in excess of the limit it’s own plan. Therefore, when your excess deferrals are due to contributing to two different plans, neither is obligated to return the excess. Sometimes, this is not so bad. Your excess is going to be added to your 2017 wages either way, and if the excess is not returned the earnings will stay in the plan rather than being distributed and taxed. As for the excess amount, eventually you will be taxed on it a second time, but only as it trickles out in retirement. Meanwhile, earnings on the additional amount continue to grow in the plan. You pay no penalties, the only negative is the second taxation years out.