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Employee making contributions to 403(b) custodial account

Guest Statler

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Guest Statler

I have a financial institution with an existing account for a participant in a deferral only, non-title 1 plan. The financial institution is no longer an approved vendor and does not have an ISA with the plan so they have stopped accepting deferrals from the employer. They have inadvertently been accepting contributions directly from the participant as non-deductible contributions (no plan involvement in this decision). They are going to distribute the contributions with earnings as an excess contribution. Do these incorrect contributions contaminate the entire account, or are the assets received prior to the ISA requirement fine? Is there anything else the institution should do? Thanks for any assistance you can provide.

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