Phil Marti
Guest
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 Posted:
Fri Oct 28, 2005 8:00 am Post subject:
Re: late notification of 401k excess contribution after roll |
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"Levi Ahlberg" <scott.levi.ahlberg@stanfordalumni.org> wrote:
| Quote: | I've got a 401k excess contribution question that I haven't
seen posted to this group before.
I've just been notified that my former employer made excess
contribution of about $5000 to my 401k last year. This
notification came in October, long after the deadline. I no
longer work at the company, and I've already rolled over the
funds into an IRA. My former employer has stated that I
should contact my current plan administrator to process a
refund of the excess contribution.
Am I under any legal or ethical obligation to get this
excess contribution refunded? As far as I know the excess
contribution was entirely the mistake of my former employer,
and was identified during their ADP/ACP testing. My
contributions did not exceed the annual limit, so I don't
think I have a problem with my own compliance with the tax
code.
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You don't have a problem with compliance, but you do have
2005 income in the amount of the excess contribution. Your
old plan will issue a 1099-R for the distribution, and Uncle
Sugar will be looking for it on line 7 of your 2005 1040.
You can either withdraw the money from your IRA or treat it
as a nondeductible after-tax contribution. See IRS
Publication 525. If you elect to leave it in the IRA, see
Publication 590 and the instructions for Form 8606.
--
Phil Marti
Clarksburg, MD
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