Hello, I am a first time poster but I have learned so much from this forum. Thank you!
My husband's megacorp has mistakenly deposited too much into our HSA & 401K. They paid him under the wrong subsidiary for several paychecks, and now they are trying to fix it. They were apparently planning to remove 3 paychecks worth of contributions to the HSA & 401K, and then re-deposit the same amounts. However, they only managed to deposit more money; they can't figure out how to remove contributions.
This was going to be our first year maxing out our HSA & 401K, so these excess contributions have put us over the federal limit.
The HSA custodian seems happy to keep accepting payments over the limit, so another contribution was deducted from the Nov 30 paycheck. However they did send us an excess contribution removal form. I am going to wait until next year for that in case his company can figure it out.
For the 401K, we got a letter from Vanguard saying we had met the limit and they would no longer be taking anything from our paycheck. In looking at our account, it looks like we've contributed $18,666 for the year, so there is still an excess contribution left.
My main concern is that megacorp will finally get around to withdrawing the mistaken contributions, but not until it is too late for us to contribute to the 401K on the Dec 31 paycheck. I am also concerned about tax penalties.
1) Has this happened to you and how did it work out?
1) What if they do not remove the excess 401K & HSA contributions until January? (This has been going on since October so I am not hopeful it will be resolved soon). Will the withdrawn contributions be applicable to 2017, or will we be personally on the hook for the excess 2017 contributions?
2) Should we ask HR/Vanguard to take $3000 out of my husband's last paycheck in case his company does withdraw the misktaken/excess contributions before that date? Or will that just lead to more headaches later if they don't withdraw it?
3) If it is the megacorp removing a contribution, do we have to explain that in our taxes, or just ignore it?
4) If we lose out on the last $3000 in tax-advantaged 401K space (as well as $900 in federal/state taxes), should I open a taxable account and put $2000 in there? We do not have any taxable retirement savings. We already contributed $5500 each to a Roth.
5) Am I correct that we have until tax day 2018 to make sure excess contributions in both accounts are removed?
6) Is there anything else to do now,or do we just wait to see what happens? My husband says he has several paycheck tickets open and has even found some HR people in person to talk to, to no avail yet.
Thank you for your time.
Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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