Excess Deferrals
Disclaimer for Tax Information
Penn HR cannot provide tax advice. The information below is intended as general information only and should not be relied upon for tax advice. For advice about your individual tax situation, please contact a qualified tax professional.What are excess deferrals?
If a retirement plan participant exceeds the IRS' 2023 annual limit for elective employee contributions, they have until the due date of their 2023 tax return to have those contributions ("excess deferrals") distributed in order to avoid adverse tax consequences.
The IRS limit for 2023 was $22,500 for participants under 50 years of age, and $30,000 for participants 50 years of age and over. These limits apply to the participant's combined total elective employee contributions across all applicable retirement plans at all employers in the tax year.
For more information, see the IRS webpage, "Consequences to a Participant Who Makes Excess Annual Salary Deferrals."
Quick Links
Contact Us
TIAA Retirement Call Center
(877) 736-6738
Penn Employee Solution Center
solutioncenter@upenn.edu
or
(215) 898-7372
How do excess deferrals happen?
Penn's system tracks your annual contributions to Penn's retirement plans and will stop your employee contributions when they reach the IRS limit. Excess deferrals typically happen when a participant contributes to more than one employer's retirement plan in a tax year.
Example: In 2023, the limit on employee contributions for people under 50 years of age was $22,500. If in 2023 you were under 50 and made contributions of $3,500 to another employer's plan, then came to Penn and made contributions of $20,000 to Penn's plan, you have an excess deferral of $1,000.
How do I request a distribution of my excess deferrals?
If you have excess deferrals from a previous year that need to be distributed from Penn's plans, please submit your request through the Employee Solution Center at solutioncenter@upenn.edu. Please attach a copy of the applicable W-2 from the other employer, or the last pay statement for that year. Please note that TIAA cannot take corrective distribution requests directly from the participant. The benefits office will request the corrective distribution from TIAA on the participant's behalf.
How do I report the distribution on my tax return?
It is commonly believed that Penn will issue an amended W-2 for a corrective distribution, but that is incorrect. As required by the IRS, your corrective distribution will be reported on a specially coded 2023 IRS Form 1099-R. This form will be sent to you in 2025. You should report the full amount of your excess deferral on line 7 of your individual tax return (Form 1040), and you should report the allocable loss as a bracketed amount on the “Other Income” line (line 21) of your Form 1040.
Because you will not receive the IRS Form 1099-R until next year, do not wait to file your 2023 Form 1040. In addition, if you have already filed your Form 1040 and did not include the entire amount of your excess deferral as taxable income (line 7), you will need to file an amended return for the year.
The amount of your excess deferral is not eligible for rollover into another qualified plan or individual retirement account (“IRA”).