Excess deferrals to Roth 403(b) and/or 401(k) five years ago

[-_-_-]

I worked for two employers in 2016. During the year, I contributed $13,000 in Roth deferrals to a 403(b) plan at the first employer (code BB on my 2016 W-2 from the first employer). Then, after moving to the second employer, I contributed $6,000 in Roth deferrals to a 401(k) plan at the second employer (code AA on my 2016 W-2 from the second employer).

In total, that means I contributed $19,000 in elective deferrals to defined contribution plans in 2016. The maximum amount allowed for elective deferrals to defined contribution plans in 2016 was $18,000. Therefore, I made $1,000 of excess deferrals in 2016. Because I didn't notice this promptly, I wasn't able to resolve it before the tax deadline in April 2017, so the excess deferrals were not refunded to me.

Questions:

1) Which plan now contains excess deferrals? Is it the first employer's 403(b), or the second employer's 401(k)? Can I choose to designate one of the two plans to be the one containing the excess deferrals?

2) Now, five years later, the second employer's 401(k) contains both Roth and traditional sub-accounts. (It also has an after-tax non-Roth sub-account and a Roth conversions sub-account, actually.) If I am forced to view the second employer's 401(k) as the plan that contains the excess deferrals from 2016, then which sub-account are the excess deferrals considered to be in now?

In the following questions I'll assume to the contrary that I am able to designate the first employer's 403(b) as the one containing the excess deferrals; this is more convenient since it contains 100% Roth funds and I no longer work at that employer so the plan is currently static.

3) Can I remedy the excess deferrals situation by taking a distribution from the first employer's 403(b)? (I think the answer is yes, though I'll have to pay income tax on the distribution as well as an early distribution penalty; but no need for back taxes on the original deferral, since I only made Roth contributions to both plans in 2016.)

4) On the date of the last contribution I ever made to the 403(b), $1,000 (the amount of the excess deferrals for 2016) was 6.14% of the total value of the 403(b). That last contribution was larger than $1,000, so I could argue that that one contribution was solely responsible for the excess deferral, and thus that on that date, the excess deferrals in the plan totalled exactly 6.14% of the plan's value (since they had just been contributed and had no earnings yet). Is it then accurate to say that the correct amount to distribute from the 403(b) in order to fully remedy the excess deferrals situation is 6.14% of the current value of the 403(b), whatever that may be? If not, how can I compute the amount that needs to be distributed?

[macuser_22]

Which plan does not matter.    It is too late to take any distribution.    The money just stays in the plan, but you do need to amend 2016 and add the excess to your tax return as wages since you did not pay the tax on that income.   When you finally take distributions (probably after retirement) that money will be taxed again.    That double tax is the penalty for not removing it by the April 15, 2017 date.

TurboTax no longer has 2016 software available for amending,

For information see IRS Pub 525 page 10
https://www.irs.gov/pub/irs-pdf/p525.pdf

[-_-_-]

Thank you for responding, but I think you missed some of the details of my question.

1. I did pay tax on the income, because it was a Roth contribution, not a traditional one. Therefore there shouldn't be any need to amend my 2016 tax return. But if someone can explain why I would need to do that, I'm all ears.
   
   Note that in your reference IRS Pub 525 page 10-11, under the section "Excess deferrals", subsection "Excess not distributed", it says (emphasis mine):
   
   

   If you don't take out the excess amount, you can't include it in the cost of the contract even though you included it in your income. Therefore, you're taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution (unless the excess deferral was a designated Roth contribution).

   
   I'm not sure why this parenthetical exists, since in fact you still are taxed twice on designated Roth contributions as far as I can tell (see references at the bottom of my post), except that the first taxation of those contributions was just the normal income tax on those contributions since they were contributed as after-tax amounts.
2. It is too late to take a corrective distribution. It is not too late to take any distribution; it will be an out-of-service distribution, taxed and (if done before age 59 1/2) penalized by 10% as any other early distribution would be, but the amount of the excess contributions plus any earnings attributable to those contributions will be marked in the plan such that that amount must be withdrawn (and not rolled over) before any other distributions are possible, including any rollovers.
   
   Therefore it is important for me to know which plan the excess contributions are deemed to be in, because I must resolve those contributions by withdrawing them and their earnings before I am able to roll over that plan into any other plan or an IRA, whereas the other plan (not containing the excess contributions) can be rolled over freely. My 403(b) doesn't have the best investment options in it, so I am eager to resolve this excess contributions issue as soon as possible (even if I have to pay an early withdrawal penalty of a couple hundred dollars) so that I can roll it over into an IRA or into my 401(k).
   
   See 26 CFR § 1.402(g)-1(e)(8)(iii) "Distributions of excess deferrals after correction period" and 26 CFR § 1.402(g)-1(e)(8)(iv) "Distributions of excess deferrals from a designated Roth account" (emphasis mine):
   
   

   (iii) Distributions of excess deferrals after correction period. If excess deferrals (and income) for a taxable year are not distributed within the period described in paragraphs (e)(2) and (e)(3) of this section, they may only be distributed when permitted under section 401(k)(2)(B). These amounts are includible in gross income when distributed, and are treated for purposes of the distribution rules otherwise applicable to the plan as elective deferrals (and income) that were excludable from the individual's gross income under section 402(g). Thus, any amount includible in gross income for any taxable year under this section that is not distributed by April 15 of the following taxable year is not treated as an investment in the contract for purposes of section 72 and is includible in the employee's gross income when distributed from the plan. Excess deferrals that are distributed under this paragraph (e)(8)(iii) are treated as employer contributions for purposes of section 415 when they are contributed to the plan.

   (iv) Distributions of excess deferrals from a designated Roth account. The rules of paragraph (e)(8)(iii) of this section generally apply to distributions of excess deferrals that are designated Roth contributions and the attributable income. Thus, if a designated Roth account described in section 402A includes any excess deferrals, any distribution of amounts attributable to those excess deferrals are includible in gross income (without adjustment for any return of investment in the contract under section 72(e)(8)). In addition, such distributions cannot be qualified distributions described in section 402A(d)(2) and are not eligible rollover distributions within the meaning of section 402(c)(4). For this purpose, if a designated Roth account includes any excess deferrals, any distributions from the account are treated as attributable to those excess deferrals until the total amount distributed from the designated Roth account equals the total of such deferrals and attributable income.