1099-R Excess contribution by employer

[mamatriagain2]

Hi.  I stopped working in 2020, but my employer made a contribution to my 401K account in early 2021.  Then, a few months ago I received a letter from Fidelity, saying that my employer had made an excess contribution and that in order to avoid a 6% penalty, I needed to withdraw the amount from my 401K.  I received a 1099-R, with amounts in Box 1, Box 2a, Box 5 and Box 7 (distribution code "E").

The problem is that I don't know which of the 3 different amounts (Box 1, 2a or 5) I'm supposed to withdraw from my 401K.  I called Fidelity and they couldn't answer the question.

I haven't had any success reaching the IRS (not surprisingly), so I thought I'd try this forum.  

Thanks!

[CSKcpa56]

• Employees can contribute up to $19,500 to their 401 (k) plan for 2021 and $20,500 for 2022.
• Anyone age 50 or over is eligible for an additional catch-up contribution of $6,500 in 2021 and 2022.
• The general limit on total employer and employee contributions for 2021 is $58,000 (catch-up at $64,500)

I'm not certain what the boxes say on your 1099R but the limits are above. You indicate the contribution was made by your employer and you made none. If your employer contributed say $70K to your 401k then you would have to withdraw $12K (because the limit is $58K) and it would be taxable to you.  

Distribution Code E—Distributions under Employee Plans Compliance Resolution System (EPCRS).

The procedure for correcting excess annual additions under section 415 is explained in the latest EPCRS revenue procedure in section 6.06 of Rev. Proc. 2019-19, 2019-19 I.R.B. 1086,

[mamatriagain2]

I maxed out the employee contribution, but even after adding in the employer contribution, it wasn't large enough to come close to the overall 401K limitations.  

My main question is, what amount do I need to refund, given there are 3 different amounts on the 1099-R form.  I think it is box 2a (which is Box 1 - Box 5, with Box 5 being employee contributions).  I suspect this is a question for the IRS, but curious if any users have experienced this same problem.  

[BillM223]

You're right that it can't be box 5, because that is the amount of after-tax dollars that you (not your employer) put into the 401(k). In fact, this makes me wonder why there is a number in box 5 at all.

I was going to say box 1 (the distribution), but it depends on what the person at Fidelity was thinking when they issued this form.

So contact Fidelity and ask them, "does box 1 contain only the original contribution or does it contain the contribution plus its earnings?" By the way, which amount is larger, boxes 1, 2a, or 5? Can you tell us the amounts?