Excess contribution to 457 (non-governmental)

[Bosno]

I am having a little trouble understanding the implications and steps I need to take even after reading some IRS documents.

I just found out that my employer doesn’t cap deferral at max so I over contributed ~300 this year already.

I don’t make a consistent amount every pay period or every year so it is hard to make sure I don’t go over the limit especially with the long lag time of changing contribution %.

What do I need to do now that I over contributed for this year to avoid any penalties and etc. ?

I read the IRS document but I’m still confused. Do I need to contact Principal and tell them to give me the 300 back (including gains?).

Do I just leave it in there and still claim it as misc income since it’s only 300 and just get double taxed on it? Are there any other penalties for doing this?

[Anonymous_]

@dmertz ??

[dmertz · Accepted solution]

It's odd that the plan does not cap the employee deferrals because failure to do so can disqualify the plan.

With regard to 2023 deferrals, you must notify the plan by April1, 2024 and the plan must distribute to you the excess deferrals by April 15, 2024.

https://www.irs.gov/retirement-plans/non-governmental-457b-deferred-compensation-plans