401k Over contribution

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flanders81
Posts: 9
Joined: Thu Feb 23, 2017 9:28 pm

401k Over contribution

Post by flanders81 » Wed Oct 11, 2017 11:19 am

I guess it's a good problem to have but I overcontributed to my 401k for 2017 and need some guidance. I left my old employer in the spring of last year. In 2017, between my own contributions and my new employer, I have contributed roughly $53000. Last month, my old employer apparently owed me some profit sharing and made a contribution of roughly $2500 into my old 401k (old 401k is at Vanguard while new employer is with a small company).

I am not eligible for catch up contributions so my belief is that I'm now over the $54k cap for the year. I believe I need to withdraw the excess contributions but I'm not sure how to do that and whether I should go through Vanguard or my new employers 401k provider.

Thanks for the help!

ERISA Stone
Posts: 1277
Joined: Tue Jun 24, 2014 8:54 am

Re: 401k Over contribution

Post by ERISA Stone » Wed Oct 11, 2017 12:22 pm

Based on what you've written, I don't think you exceeded any limit. If you left your old company in 2016, the $2500 profit sharing contribution is a 2016 contribution. You wouldn't have a basis to receive a benefit for 2017.

If the two companies are not related, you get a $53k annual additions limit for each company (technically 100% of compensation up to $53k). Your 18k 401k limit is in total among all the plans in which you participate.

It might help for you to clarify two things:

1. Did you make 401k contributions over $18k in total for BOTH plans in 2016 or 2017? If not, you're good.
2. Did you receive more than $53k in either plan separately in 2016 or 2017? If not, you're good.

Spirit Rider
Posts: 6158
Joined: Fri Mar 02, 2007 2:39 pm

Re: 401k Over contribution

Post by Spirit Rider » Wed Oct 11, 2017 12:24 pm

There are two different contribution limits for 2017.

There is an $18K employee deferral limit for all employers. If you have exceeded this between the two employers, you will have an excess contribution that must be removed with associated earnings.

The is a $54K annual addition limit (employee + employer contributions) that is different for each unrelated employer. An individual employer should not allow you to exceed this limit. It does not matter that you total contributions at two different employers exceed $54K

flanders81
Posts: 9
Joined: Thu Feb 23, 2017 9:28 pm

Re: 401k Over contribution

Post by flanders81 » Wed Oct 11, 2017 5:37 pm

Thank you both. Really appreciate the advice. My combined contributions did not go over the 18k limit so it sounds like I am in the clear. I wasn't aware the 54k limit was per employer.

Thanks again.

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