Over Contribution

[Dennis Povloski]

If a plan sponsor erroneously contributes to much to their plan. What are the acceptable methods of getting the money back out.

In this case, the max deductible contribution is $37,000, and the client put in $78,000.

There was no error in the actuarial calculation, so I don't know what prompted the larger amount to be contributed. Can it be removed as a Mistake in Fact?

I always thought that if the amount exceeded $25,000 that you had to apply to the IRS to get them to disallow the deduction, which would allow a removal of the contribution.

Thanks!

[Andy the Actuary]

Can it be presumed that there is no opportunity to allocate this contribution to two different tax years?

What is the Plan Year, what is the fiscal year? Was the contribution contributed in the current year while the prior year was on extension?

[Dennis Povloski]

The plan and fiscal year are both calendar. All contributions were deposited during the year, and the contributions were maxed out in the prior year, so I don't think there's any way to attribute the contributions to any other year.