Asked anonymously

What should we do if we made a duplicate safe harbor year end contribution for our employees in error?

The year-end contribution was equal to the 3% total for the year, but we had already made contributions on a per pay-period basis for each employee, so the year-end was a duplicate. Employees received 6% into their accounts for last year. Can we use the over-payment toward current-year contributions, are there forms we need to complete, and what effect does this have on the employees?

Report Question Report

  Leave Answer

Sign in to MoneyTips
By submitting you agree to our Terms of Service

  Answers  |  1

June 27, 2017

Hi Anonymously
Your plan administrator's compliance department should correct this.

Excess contributions can lead to disqualification. If applicable, you could issue a 1099R.

Here is the IRS wording:
RC Section 72(t) imposes a 10% additional tax for distributions that don't meet an exception, such as death, disability or attainment of age 59 ½, among others. To avoid this additional tax, correct excess deferrals no later than April 15 of the following year. If you don't correct by April 15, you may still correct this mistake under EPCRS; however, it won't relieve any Section 72(t) tax resulting from the mistake.
https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-elective-deferrals-exceeded-code-402g-limits-for-the-calendar-year-and-excesses-were-not-distributed

Have your compliance department set-up a conference call with our compliance department and we may be able to get this resolved in a timely manner.

It’s not what you make; It’s what you keep that determines your lifestyle.

$commenter.renderDisplayableName() | 09.17.19 @ 02:56

{comment}