401k contribution from 2 employer exceed limits 2021

[Mckaylan]

I have a client that switched jobs in 2021, his elected deferrals from one company was $12.5k and the other was $9.6k both are 401k's. Is there an election we can take to exclude the $2,600 overage from current year income?

I feel like I read that you can have multiple retirement accounts that exceed the limit provided there is no commonality or relationship in the business. Is that in a case for a individuals who have two different kinds of accounts like a SIMPLE and a 401k or would two of the same type of accounts qualify for that?

Thank you in advance for the help!

Signed, a very tired accountant.

[PhoebeRoberts · Accepted solution]

The limit on annual employee 401(k) deferrals is per live-bodied person. The employer contribution has some rules that let you work around the limits, and people who participate in the right combination of plans can work around the limits, but your guy is out of luck.

He also needs to withdraw the excess deferral, and earnings thereon, from whichever plan he likes talking to the most, by 4/18.

[qbteachmt]

You might be remembering how the Catch Up amount works, if there are two plans:

"If Joe Saver, who’s over 50, has only one employer in 2020 and participates in that employer’s 401(k) plan, the plan would have to permit catch-up contributions before he could defer the maximum of $26,000 for 2020 (the $19,500 regular limit for 2020 plus the $6,500 catch-up limit for 2020). If the plan didn’t permit catch-up contributions, the most Joe could defer would be $19,500. However, if Joe participates in two 401(k) plans, each maintained by an unrelated employer, he can defer a total of $26,000 even if neither plan has catch-up provisions. Of course, Joe couldn’t defer more than $19,500 under either plan and he would be responsible for monitoring his own contributions.

The rules relating to catch-up contributions are complex and your limits may differ according to provisions in your specific plan. You should contact your plan administrator to find out whether your plan allows catch-up contributions and how the catch-up rules apply to you."

From: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sha...