Excess 401K match

[Cpadave]

My client has received a letter from her former employer requesting a payment of excess match contribution related to 2007 and 2008 plus interest thereon. The 401K had been rolled over in to her IRA about 4 years ago. Is she required to pay this amount given it was an error by her old employer made many years ago? If she has to make this payment, can it be taken out of her IRA tax free? Thank you for your help. 

 

  

[K2retire]

The excess amount was likely not eligible for rollover. If it is not returned, it will potentially require amending tax returns and possible excess IRA contributions for those years. The logistics can get tricky, but it should be returned directly to the plan without generating any tax liability.

[Bird]

2007 and 2008, really?  It was indeed ineligible for rollover, but it's too late and trying to get it out now without tax consequences is probably impossible - you can try to explain it to the IRA provider but they will absolutely want a code for a 1099-R and I can't begin to imagine what code would be correct.

I'm usually on the other side and don't appreciate it when participants say something to the effect of "what are you gonna do about it?" but that would be my inclination.  Someone might be going through the motions so they can shrug their shoulders and say "we tried."