Remind Clients To Remove Excess Salary Deferrals!

And Help Them Avoid ADP/ACP Non-Discrimination Testing For 2022
Excess Salary Deferrals
The total of all salary deferrals a participant is allowed to make to various retirement plans – including 401k, 403b, and SARSEP plans – is $19,500 (plus an additional $6,500 if age 50 or older) for 2021.
 
Please note that individuals who made salary deferral contributions to two or more retirement plans in 2021 may be most at risk for exceeding the deferral limit. If an individual defers more than this limit for 2021, the excess deferral amount plus earnings must be distributed to participants by April 15th, 2022. Per the IRS (IRC Section 402(g)(1) and Reg. Section 1.402(g)-1(e)(2)), unless excess deferrals are timely distributed, they will be included in a participant’s taxable income for the year contributed, and taxed a second time when the deferrals are ultimately distributed from the plan. The corrective distribution must be made no later than April 15th following the close of the calendar year during which the excess deferral was made.   Read More  »