Return of Excess 401k Contributions after rolling over to IRAs

Submitted by Kyle Smith on Thu, 2023-10-19 22:13

I left my former employer in January of this year and rolled over the full balance of my 401k to Traditional and Roth IRAs a couple months after. In August I received letters that there were excess contributions made to the plan in 2022. However, since I had already rolled over my funds this year they were unable to remove the excess contributions. They sent me two letters. One referenced about $3,500 of excess employer matching contributions and the other referenced about $4,000 of personal contributions. They mentioned that both would be taxable to me and instructed me to work with my IRA provider to process return of excess contributions. I have a few questions regarding this.

1. They listed both amounts as taxable even though I only made Roth contributions in 2022. They also said in the letter that $0 of my contributions represented after-tax contributions which didn’t make sense to me. Can you help me understand this? Shouldn’t those Roth contributions be non-taxable when I remove them from my Roth IRA? If the amounts withdrawn weren’t from my Roth contributions then where could they be coming from?

2. They will issue multiple 1099s this year. 2 1099s showing the amounts of my pre-tax and Roth rollover amounts as reportable, non-taxable events. 2 1099s for the two excess contributions coded ‘E’. My concern is that the 1099s coded ‘E’ will create a taxable event and then when I process the IRA distributions those will also create taxable events. How am I supposed to file everything to ensure that I don’t get taxed twice this year? Also, if they’re showing the $4,000 as taxable, would it be advisable to withdraw the total of both amounts provided from my Traditional IRA as opposed to my Roth IRA?

Any guidance or support that could be provided on this would be greatly appreciated. Thanks so much!



Submitted by Alan - IRA critic on Fri, 2023-10-20 17:02

  1. The distribution of excess Roth 401k contributions should be non taxable. You are correct that if you are sure that these 2022 contributions were Roth, the 1099R you will receive should not have a taxable amount except for any gains on those contributions. Further, the distribution code on the 1099R should not be 8 or P, not “E”.
  2. As for the 3500 of excess employer contributions, do they want to claw back any of that? Your rollover should not have included any unvested matching contributions in the first place. 
  3. The excess IRA contributions resulting from a rollover of excess contributions are a separate issue. You might have these for both your TIRA and Roth IRA. The deadline to remove the excess from these IRAs for a 2023 excess (rollover was done in 2023) is 10/15/2024 so you have plenty of time. Any gains distributed on these amounts that were generated in the IRAs will be taxable in 2023 even if you remove them in 2024. 
  4. There will be 1099R forms for the allowed (non excess amounts) of the direct rollovers you did, one for the pre tax and one for the Roth 401k. These are separate 1099R forms from the excess amounts. You should have these transactions reviewed and corrected by the plan before you deal with the IRA excess contributions. Again, there should be no double taxation of any amounts.


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