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Last fall, I changed jobs. Shortly after, I rolled over my 401(k) from my previous employer into a rollover traditional IRA. Later, I rolled traditional IRA into my new employer's 401(k) plan. Now the plan administrator from my previous employer contacted me to tell me that the plan's Actual Deferral Percentage testing failed and as a result I had made excess contributions for last year. They already sent me a 1099-R for the original rollover and are now sending me an adjusted 1099-R for the rollover and an additional 1099-R for the excess contributions.

To make this easier to understand, here are the forms I have:

  • outdated 1099-R from previous employer showing $15,000 rollover to traditional IRA
  • amended 1099-R from previous employer showing $10,000 rollover to traditional IRA
  • 1099-R from previous employer showing $5,000 of taxable excess contributions
  • 1099-R from traditional IRA provider showing that I rolled over $15,500 into my new employer's 401(k) (includes $500 of earnings while the money was in the traditional IRA)

My question is, what do I need to fix this? Can I fix this by asking for a return of excess contribution from my new employer's plan? Or do I need to do something with the intermediate rollover traditional IRA?

Side note: I've already maxed out my IRA contributions for both current and prior years.

Related: Return of excess 401k contributions after rollover to IRA

Chris W. Rea
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Spig
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1 Answers1

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So you have this situation, based on the 1099s:

  1. You contributed 15000 into a 401k, and withdrew 10000 as a rollover and 5000 as excess contribution.

  2. You contributed 15000 into an IRA, of which 10000 has a tying 1099 to be considered a rollover, and the remaining 5000 is an excess contribution.

  3. You contributed 15500 into a 401k, for which there's a tying 1099 showing 15500 rollover, but part of it is sourced in excess contribution.

You now need to sort it out.

The solution would probably look similar to what the original 401k custodian did. The IRA custodian needs to calculate how much of the distribution was based on the valid 10K rollover, and how much was based on the 5K excess and issue corrected 1099s, and then with that you go to the new 401k custodian and have them calculate the portion attributed to the excess and withdraw it.

littleadv
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