Suppose the following:
- Contribute $50,000 to pre-tax 401k
- 401k grows by 5%
- 401k is rolled over to traditional IRA
What is the proper course of action to return the excess 401k contribution? What forms need to be filed? What important deadlines (calendar year, filing date, etc.) are there?
- Is it too late once the rollover happens? In this case is the excess contribution penalized in perpetuity?
- Can the same process/calculation used to return the contribution be executed in the IRA (withdraw excess + earnings on excess). In this case, how would 1099-R be handled, especially given the distribution code may be incorrect