Remove Excess Salary Deferrals by April 15, 2022

Bookmark and Share

IRS.gov Banner
Employee Plans News February 4, 2022

Useful Links

IRS.gov/Retirement

Retirement Plan & IRA Contribution Limits

EP Compliance Priorities

Correcting Plan Errors

Retirement Plan Webinars

Request a Speaker

Form 5500 Corner

Small Employer Retirement Plans

 


Other IRS Resources

IRS Social Media

Coronavirus Tax Relief

Contact Your Local IRS Office

Forms & Pubs

Tax Help

IRS Newsroom

Taxpayer Advocate

Tax Info for Individuals


Remove Excess Salary Deferrals by April 15, 2022

The total of all salary deferrals a participant makes to various retirement plans – including 401(k), 403(b), SARSEP and SIMPLE IRA plans – is limited to $19,500 (plus an additional $6,500 if age 50 or over) for 2021.

If you exceed this limit for 2021, you must take corrective action to withdraw the excess deferral amount, plus earnings, by April 15, 2022.

If you withdraw the excess salary deferrals, plus earnings, by April 15:

  • Excess deferrals are taxed in the calendar year deferred (2021)
  • Earnings on the excess are taxed in the year withdrawn (2022)
  • Excess is not subject to the 10% early distribution tax, 20% withholding, or spousal consent requirements

If you don’t withdraw the excess salary deferrals, plus earnings, by April 15:

  • Excess deferrals are taxed in the calendar year deferred (2021) and again in the year withdrawn
  • Earnings on the excess are taxed in the year withdrawn
  • Withdrawals may be subject to the 10% early distribution tax, 20% withholding, and spousal consent requirements
  • Make correction to the affected plan using the Self-Correction or Voluntary Correction Programs

Individuals who made salary deferral contributions to two or more retirement plans in 2021 may be most at risk for exceeding the deferral limit. The Interactive Tax Assistant can help you determine how to correct excess salary deferrals.

Retirement Plans Video Series

This IRS video series for small employers and self-employed individuals provides an overview of the key features of many different types of retirement plans.

What you Should Know About Retirement Plans: This video series discusses the key features of the qualified retirement plans many small employers have adopted.

What you Should Know About IRA-Based Plans: This video series discusses the key features of the IRA-based plans adopted by many small employers.

Retirement Plans for Small Employers and Self-Employed: This recorded webinar, in English and Spanish, helps you compare the types of retirement plans available for your business or organization.


Find answers to many of your retirement plan or IRA questions at IRS.gov/Retirement.

If you need help with an account-specific question, basic information about retirement plan forms or the status of pending applications, call our Customer Account Services at 877-829-5500.

For the latest retirement plan news, connect via IRS Social Media and subscribe to this and other IRS newsletters. 

This message was distributed automatically from the mailing list Employee Plans News. Please do not reply to this message.