Author Topic: Over-contributed to 401k  (Read 2391 times)

jrhampt

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Over-contributed to 401k
« on: March 09, 2015, 07:32:31 AM »
I had two jobs in 2014 and contributed to a 401k at both jobs.  It turns out that I over-contributed by $17 (exceeded the maximum $17500 for last year).  Has anyone had this issue before?  I think I can call up my 401k plan and ask them to remove the $17 before April 15th so I don't get hit with penalties, but is this amount so small that I just shouldn't bother?  What would you do/have you done in a similar situation?

RexualChocolate

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Re: Over-contributed to 401k
« Reply #1 on: March 09, 2015, 07:52:39 AM »
Very interesting case- can you let us know what the penalties are?

I would call the 401k plan and try to mess with it, going over limits is an audit risk.

jrhampt

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Re: Over-contributed to 401k
« Reply #2 on: March 09, 2015, 08:18:37 AM »
I'm not sure what the penalties are, but I did just get off the phone with my current 401k plan administrator.  They will mail me a form to fill out, and I need to send it back to them along with copies of my w-2s from both employers (or final pay stubs) so that they can verify the overcontribution amount.  I believe this paperwork has to be submitted on their end by April 1st, and then they will send me a check for the difference.  Then I should be all set.  Not sure what happens if I were to wait until after April 1st/15th, but I guess I don't have to find out this time.

Edited to add:  I do have to fill out 2 1099-R forms - one for this year - because the returned contribution counts as income for 2014, and then for some reason I also have to fill out a 1099-R form for 2015 taxes.  Not sure why this shows up in two years.
« Last Edit: March 09, 2015, 09:33:26 AM by jrhampt »

uspsfanalan

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Re: Over-contributed to 401k
« Reply #3 on: March 09, 2015, 10:58:32 AM »
Great topic, I've wondered about this myself. My wife is changing jobs so we may run into this issue at the end of 2015. In 2014, I erred on the side of caution and ended up putting 17,250 approximately into my 401k because I didn't want to go over.

The good news is that if you take out the contributions and earnings prior to April 15th you won't have a penalty.
http://finance.yahoo.com/news/over-contributed-ira-401-k-151500104.html

Since it's that easy, it would be better to come as close as you can with the expectation that you may go over. Should only happen in years where you change companies.

chops

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Re: Over-contributed to 401k
« Reply #4 on: March 09, 2015, 01:41:37 PM »
You can also fund your Roth Ira with after tax funds from your 401k.   The IRS recently published notice 2014-54 which expressly allows this starting in 2015. 

-Chops

lise

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Re: Over-contributed to 401k
« Reply #5 on: March 09, 2015, 01:49:06 PM »
This happened to me a while back.  I have to look back at the paperwork but I recall no penalty because I withdrew, but I had to pay tax on any earnings I made on the over contributed amount as if it was invested in a taxable account..  Which was minimal, and I think will be really minimal on $17!

AlanStache

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Re: Over-contributed to 401k
« Reply #6 on: March 09, 2015, 02:08:53 PM »
Do you need to also with drawl and pay tax on any profit from the 17$ (prorated I assume from the last deposit to the withdrawal date)?  This is the norm if you have to recharaterize from a Roth into a Traditional IRA after contributing to much.