Retirement Refund FAQs

The Internal Revenue Code has numerous restrictions on the contributions that may be made to a retirement plan. If excess amounts occurred, the plan must return them to the affected participants.

Based on our records, your contributions exceeded IRS limitations for this year. The plan is required to distribute this amount (excess deferral) to you, adjusted for investment gain or loss.

If you received two checks, the larger represents the excess deferral and the smaller the investment gain.

The distribution may impact your income tax return for the year in which you received it. You should confirm that your tax preparer or the tax software program captured the excess deferral amount from your W-2 at the time of filing. If not, you may have to amend your return.

Investment gains and losses are reported on your income tax return.

Yes, the plan is required to report the distribution and investment gain/losses on IRS Form 1099-R which you will receive by January 31, following the year of distribution.

The Internal Revenue Code has numerous restrictions on contributions that may be made to a retirement plan. If excess amounts occurred, the plan must return them to the affected participants.

The IRS limits the total amount which may be contributed by participants to the plan each year (Annual Addition). This limitation considers both employer contributions and participant salary deferrals to the plan, (see your Human Resources Department for the current limits). If the limitation is exceeded, the plan must refund the excess to you adjusted for gains and losses.

You do not have to amend your return for the year amounts were contributed to the plan, but the distribution will impact your tax reporting for the year of distribution. Generally, the distribution is taxable income to you except for the portion, if any, which represents a refund of a Roth contribution.

The plan will report the refund to you and the Internal Revenue Service on Form 1099-R. Form 1099-R will detail the type of distribution and which portions are considered taxable income. You will receive Form 1099-R by January 31 following the year of distribution.

The Internal Revenue Code has numerous restrictions on the contributions that may be made to a retirement plan. If excess amounts occurred, the plan must return them to the affected participants.

The IRS limits the amount a Highly Compensated Employee (HCE) may contribute to the plan and the amount of match they may receive. In general, the average rate for the HCEs as a group cannot exceed the average rate for the other participants by more than 2%. If the limitation is exceeded, the plan must refund the excess adjusted for gains and losses.

A Highly Compensated Employee (HCE) is defined either by ownership or compensation. An employee who owns, directly or indirectly, more than 5% of the company is an HCE. The Code has attribution rules and thus certain family members or others may be HCEs without direct ownership in the company. Also, compensation can make an employee an HCE. The determination is based on compensation earned in the prior year. The compensation amount is indexed for inflation and adjusts periodically per Treasury Regulations.

You do not have to amend your return for the year you contributed to the plan. The impact on your taxes this year depends on the following:

• The type of deferral. If you made a pre-tax contribution it reduced your taxable income for the year it was contributed. Therefore, the Code requires you to recognize the refund as income in the year of receipt. If you made a Roth deferral, you received no income reduction in the year contributed and do not need to recognize income in the year of receipt.
• Whether a matching contribution is included. If the limit on matching contributions was exceeded, the match portion of the refund is taxable income to you. This amount was not originally taxed.
• Earnings. Regardless of whether your refund consists of pre-tax or Roth deferrals, the earnings (if any) are taxable income to you.

The plan will report the refund to you and the Internal Revenue Service on Form 1099-R. Form 1099-R will detail the type of distribution and which portions are considered taxable income. You will receive Form 1099-R by January 31 following the year of distribution.