Pre-Tax and After-Tax Excess 401k Contributions

Submitted by Larry Edwards on Wed, 2018-03-21 06:01

Dues to a job change in 2017, I made the mistake of contributing more money than allowed to two different 401k plans in 2017 (one from each employer). My first plan, I contributed only pre-tax money. The second plan, I contributed both pre-tax and after-tax money. It was about $7500 in total ($5000 in pre-tax and $2500 in after-tax contributions). I contributed about $3000 too much between the two plans. I’ve already submitted the paperwork to the second plan to get the excess contribution refunded. That will hopefully occur before before April 15th. I assume that the $3000 excess would be split as $500 pre-tax and $2500 after-tax and that’s how I would declare it on my 2017 taxes. Does that sound correct? If so, does that mean on my tax form, I would declare a total distribution of $3000 with $500 being taxable? I shouldn’t have to pay taxes on the post-tax contributions that I get back correct? Any thoughts or suggestions are more than welcomed…..Thanks!



Submitted by Alan - IRA critic on Wed, 2018-03-21 15:51

Please indicate the total amount you contributed to each plan, since it not clear that you exceeded any limit here. And was the after tax contribution Roth or non Roth? And both plans were 401k?

Submitted by Larry Edwards on Thu, 2018-03-22 00:31

Thanks for taking the time to read and respond to my question.At the first company, I contributed about $13,500 in pre-tax money in their 410k plan.At the second company, I contributed about $5,000 in pre-tax money in the their 401k plan and $2500 in after-tax money in their 401k Roth plan.I’m not old enough yet to use the catchup contribution.Since my limit is $18,000 in total contributions, I need to pull about $3,000 from the second companies plans. Like I’ve mentioned, I’ve submitted the paperwork to do this. What I don’t exactly know is how to declare this on my 2017 tax forms. My thought was that I would need to declare $500 as taxable and $2,500 at not (but a total of $3,000 would be listed on the form). I also assume I would need to declare any money made from this $3,000 for next year’s taxes.Let me know if I can clear up any other questions and I appreciate your thoughts on this.Thanks,LE

Submitted by Alan - IRA critic on Thu, 2018-03-22 03:22

  • OK – that is the info I needed, and you are on the right track. I believe that the plan will specify how much of your 3,000 excess deferrals returned will be Roth and how much will be from the pre tax account. Until you actually receive the distributions or confirmation which type of deferrals will be returned, you may not know the breakdown and will not know how much you need to increase your line 7 wages for 2017. While any earnings will be taxable in 2018 as you indicated  (1099R forms issued in Jan, 2019), your line 7 wages on your 2017 return will only be increased to the extent that the returned deferrals were pre tax. You have already paid taxes on the Roth deferrals. 
  • Note that when you exceed the 402g limit (18k) over more than one plan, you can request the return from either plan, but both plans can refuse the return. A plan is only required to return amounts over 18k contributed to that particular plan. Since you asked the second plan to process the corrective distribution, the Roth deferrals are brought into the picture. If the plan provisions call for the Roth excess to be distributed first, then your breakdown is correct and you will only have to increase wages by 500.

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