What’s inside:
• Excess
descriptions
• Form
403(b)(7)/Individual 401(k)
Corrective Measures Kit
For plan administrators to provide instructions to remove an excess
contribution from a 403(b)(7) or Individual 401(k) account
Retirement plan contributions in excess of the applicable IRS limits can result
in adverse tax consequences to participants and employers. IRS guidance
(in conjunction with the terms of your plan) provides methods and time frames
to correct such excess amounts and avoid potential plan disqualification.
Consult a tax advisor or legal counsel
If an excess amount has been contributed to the plan, we strongly encourage you
to consult your tax advisor, legal counsel, or third-party administrator to determine
the type of excess that applies and how to correct it. See the next page for brief
descriptions of each excess type and the appropriate action to take with Vanguard.
After you‘ve determined which type of excess applies, complete the enclosed
403(b)(7)/Individual 401(k) Corrective Measures Form. The plan administrator
must complete Section 1 of the form and the participant must complete
Section 2.
Questions?
Call us at 800-962-5068 Monday through Friday from 8 a.m. to 8 p.m., Eastern
time. We’ll be happy to help you.
Determining what type
of excess occurred
The table below is a general summary intended to help you understand the different types of excess amounts
and corrective measures.
Type
Description
Action required
Excess deferral*
Employee deferral in excess of the
limit under IRC Section 402(g).
To avoid double taxation, the excess deferral
amount and earnings must be distributed to the
participant by April 15 of the year following the year
the excess deferral was made. In general, if the
excess deferral isn’t distributed by the April 15
deadline, corrective distributions may be made only
if the participant is otherwise eligible for a
distribution.
Nondeductible
contribution
Employer contributions to a qualified
plan in excess of the applicable
deduction limit for the plan year.
Nondeductible contributions remain in the plan
and may be carried forward and deducted in
subsequent years. The employer may be subject
to a 10% excise tax on the nondeductible amount
each year until corrected.
Don’t complete the enclosed form to correct a
nondeductible contribution. Vanguard doesn’t need
to be notified of this type of excess.
Excess annual
additions*
Total additions to a participant’s account
which exceed the lesser of 100% of the
participant’s compensation or the dollar
limits under IRC section 415(c). These
may include both salary deferral
contributions and employer contributions.
Individual 401(k) plan. In general, the portion of
the excess attributable to employee deferrals may
be returned to the participant, and any remaining
excess is reallocated in accordance with the terms
of the plan.
403(b) plans. In general, the portion of the excess
attributable to employee deferrals may be returned
to the participant. Any remaining excess attributable
to employer contributions must also be distributed.
Excess aggregate
contributions*
Employee after-tax or employer
matching contributions under
IRC Section 401(m) that fail the
Actual Contribution Percentage (ACP)
test. (Not applicable to Vanguard
Individual 401(k) plans.)
The employer may be subject to a 10% excise
tax unless excess and earnings are returned
to the participant within 2½ months after the
end of the plan year (March 15 for calendar year
plans). The excess aggregate must be corrected
by the end of the plan year following the year of
the excess.
Mistake of fact
A mistaken contribution (generally due
to a mathematical or clerical error).
Mistakes must be corrected within one year of the
mistaken contribution. The mistaken contribution
(reduced by any losses) will be returned to the
employer.
To correct a mistake of fact, don’t complete
the enclosed form. Please call Vanguard for
the applicable form.
If corrections aren’t made by the applicable IRS deadlines above, the employer may be eligible to use the Employee Plans Compliance Resolution
System (EPCRS). For more information, go to www.irs.gov and search for EPCRS. To request a correction in accordance with EPCRS, call us at
800-376-9162 for instructions; don’t use the enclosed form.
Note: The limits described above don’t reflect catch-up contributions for participants age 50 or older or special 403(b) contributions for participants
with 15 or more years of service. If such contributions are permitted under your plan, limits may differ.
*These excesses can be corrected using the enclosed 403(b)(7)/Individual 401(k) Corrective Measures Form.
Form CMDF
Clear All
403(b)(7)/Individual 401(k)
Corrective Measures Form
Effective November 2016
Use this form to remove an excess amount from a Vanguard 403(b)(7)
or Individual 401(k) participant account. Corrective distribution checks will
be sent to the participant’s address that we have on file, if applicable.
Questions?
Call 800-962-5068.
If you need other forms, go to
vanguard.com/serviceforms.
Don’t use this form for nondeductible contributions or mistake-of-fact
contributions. To remove excess contributions for account types other
than those noted above, contact us for the appropriate form.
Important: This form consists of two sections. Section 1 must be
completed and signed by the plan administrator, and Section 2 must be
completed and signed by the plan participant. If Sections 1 and 2 aren’t
signed by the appropriate people, you’ll need to resubmit a new form.
1. Employer information
to be completed by the plan administrator
Plan information
Plan name
Plan ID number
Plan year Check one.
Calendar
Fiscal, year ending ______ / ______
Type of plan Check one.
403(b)(7) ERISA
Individual 401(k)
403(b)(7) Non-ERISA
Individual Roth 401(k)
Type of excess
Check and complete A, B, C, or D. Note: Checking more than one option
will delay your request.
For excess deferrals
as part of annual
additions, check and
complete B instead.
>
A. Excess deferral for 403(b)(7) or Individual 401(k) plans
The excess amount provided below will be adjusted for earnings or losses and distributed
to the participant. This form may only be used if the excess amount is being removed by
April 15 of the year following the year the excess deferral was made. Don’t complete this
form if the deadline has passed; your request won’t be completed. Instead, call us for
information on correcting excess deferrals after the April 15 deadline.
Vanguard account with excess deferral
Name of participant
Account number
Amount of excess
Tax year
$
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Form CMDF
B. Excess annual additions for Individual 401(k) plans
Complete this section if the total contributions made to the plan exceed the participant’s
earned income or exceed the dollar limit under Internal Revenue Code Section 415 for the
specified tax year.
The excess annual additions will be corrected according to plan rules and IRS guidelines, as
follows:
1. Elective deferrals (adjusted for earnings or losses) up to the amount needed to correct
the excess will be distributed to the participant.
2. If excess annual additions still exist after removing elective deferrals, employer
contributions (adjusted for earnings or losses) will be removed—up to the amount
needed to correct the excess—and placed in a suspense account within the plan.
Vanguard account with excess annual additions
Name of participant
Account number
Amount of excess
Tax year
$
If a portion of the excess must be placed in a suspense account, the amount will be placed
into your plan’s existing suspense account. If your plan doesn’t have a suspense account,
a new suspense account will be opened under your employer tax ID number in the fund
specified below. If no fund is indicated, the new suspense account will be opened in Vanguard
Federal Money Market Fund.
Fund for suspense account
Note: When making future employer contributions, you must first use all the assets in the suspense
account before you can make any new employer contributions. If you’d like to reallocate money from
the suspense account, provide us with written instructions, including dollar amounts, participant
names, and the accounts that should receive the money.
C. Excess annual additions for 403(b)(7) plans
Vanguard account with excess annual additions
Name of participant
Account number
Amount of excess
Tax year
$
Portion of excess attributable to elective deferrals. The excess amount provided below will
be adjusted for earnings or losses and distributed to the participant.
Amount
$
Remaining excess attributable to employer contributions (if any) provided below will
be adjusted for earnings or losses and distributed to the participant (unless you provide
alternative distribution instructions according to the terms of your plan).
Amount if applicable
$
The plan administrator must sign on the next page.
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Form CMDF
D. Excess aggregate contributions for 403(b)(7) plans
The excess amount provided below will be adjusted for earnings or losses and distributed
to the participant.
Vanguard account with excess aggregate contribution
Name of participant
Account number
Amount of excess
Tax year
$
Signature of plan administrator
required
I authorize Vanguard to process the correction in the manner indicated above. I understand
that Vanguard will calculate earnings or losses at the account level on a pro-rata basis.
The plan
administrator
must sign here.
If not, you’ll need
to resubmit a
new form.
Signature of plan administrator
Date mm/dd/yyyy
> X
Print name
2. Participant information
to be completed by the plan participant
Vanguard mutual funds from which to remove the excess
Remove the excess from the funds as indicated below.
Fund number
Account number
Percentage
Fund number
Account number
Percentage
%
If you don’t provide
a fund and account
number, it could
delay your request.
>
%
Fund number
Account number
Percentage
%
Must total 100%
Important: Because of market fluctuations, the account balance in the Vanguard funds indicated
above may be insufficient to remove all of your excess and earnings. Should this be the case, you
must indicate an additional Vanguard fund—held in the same 403(b)(7) or Individual 401(k) account to
which you overcontributed—from which the remaining excess and earnings should be withdrawn.
You must provide
this information.
>
Fund number
Account number
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Form CMDF
Income tax withholding election
• Regardless of your withholding election, you must pay any tax due on the taxable
portion of the distribution.
• You may be subject to tax penalties if federal and state taxes are due and your estimated
tax payments and the amount of tax you have withheld are insufficient under IRS rules or
your state’s rules.
• Your withholding for federal and state taxes, when combined, can’t exceed 100% of
your distribution.
• A summary of the taxation for corrective distributions of excess amounts can be found
at the end of this form.
Federal income tax withholding
• Excess amounts distributed from 403(b)(7) and Individual 401(k) accounts (except for the return of
excess deferrals and Roth amounts) are subject to federal tax withholding at a rate of 10% unless
you check the Don’t withhold box or specify a higher amount below.
• For excess annual additions and excess aggregate contributions, if you don’t check one of the boxes
below, Vanguard will withhold 10% of the taxable portion of the distribution.
• For excess deferrals, if you don’t check one of the boxes below, federal income tax won’t be
withheld from the distribution.
Special rules for addresses outside the U.S.
If your account is registered to an address outside the U.S. or your payment is being directed
outside the U.S., we’re required to presume your tax status to be foreign and withhold 30%
federal income tax from your distribution unless one of the following applies:
• You’re a U.S. person (including a resident alien) and we have a valid IRS Form W-9 on
file. We’re required to withhold 10% federal income tax from your distribution. You can’t
elect out of federal income tax withholding for distributions delivered outside the U.S.
• You’re not a U.S. person and we have on file a valid IRS Form W-8 on which you’ve
claimed tax treaty benefits. If you’re eligible for a reduced withholding rate based on a
tax treaty your country has with the U.S., you may claim the reduced rate by completing
Form W-8, including the section titled “Claim of Tax Treaty Benefits,” and providing either
your U.S. taxpayer identification number (TIN) or your foreign TIN. If your claim is valid, the
reduced rate will be applied.
If you have an address outside the U.S. and aren’t sure whether we have a Form W-9 or W-8
on file for your account, please call us. We’ll provide you with further instructions for completing
either a paper Form W-9 or an electronic Form W-8.
Check one.
If you check this
box, Vanguard
won’t withhold
state income tax
either; skip to
“Signature of
participant.”
>
Don’t withhold federal income tax from the taxable portion of the distribution.
Withhold at a rate of ________% from the taxable portion of the distribution.
The rate must be at least 10%.
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Form CMDF
State income tax withholding
If you have questions regarding state withholding, contact your tax advisor or your state’s taxing
authority. If you aren’t a resident of one of the following states, skip to Signature of participant.
Provide your state
of residence if
different from what’s
listed on the account.
>
Residents of Iowa, Kansas,
Maine, Massachusetts, Nebraska,
Oklahoma, and Virginia
If federal tax is withheld, state tax withholding is
mandatory. Vanguard will automatically withhold the
minimum required by your state unless you specify a
higher amount below.
Residents of Arkansas, California,
Delaware, Georgia, Michigan,
North Carolina, Oregon, and Vermont
If federal tax is withheld, state tax withholding is
mandatory unless you specifically elect not to have
state tax withheld. Vanguard will automatically
withhold the minimum required by your state unless
you either check the Don’t withhold box or specify a
higher amount below.
Residents of Mississippi
If federal tax is withheld, state tax withholding is
mandatory if your distribution is subject to the federal
early withdrawal penalty. Vanguard will automatically
withhold the minimum required by Mississippi unless
you specify a higher amount below.
Residents of Indiana, Louisiana,
Maryland, Missouri, Montana,
New Jersey, New Mexico, New York,
Utah, and Wisconsin
State tax may be withheld regardless of your federal
withholding election. Vanguard will or won’t withhold
as you indicate below.
State of residence
Vanguard will use the address of record on your 403(b)(7) or
Individual 401(k) plan account to determine state withholding
requirements. If the state listed on the account isn’t your legal
state of residence, provide that information here.
Check one.
Don’t withhold state income tax from the excess contributions.
Withhold my state’s minimum requirement.
Withhold this amount (we’ll withhold at least
your state’s minimum requirement):
%
or
$
Print Entire Kit
Print Form Only
The participant must sign on the next page.
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Form CMDF
Signature of participant
required
I understand that corrective distributions aren’t eligible to be rolled over.
Signature of participant
You must sign here.
Date mm/dd/yyyy
> X
Print name
Corrective distributions of excess amounts are generally taxable as follows:
• Corrective distributions of excess aggregate contributions (and earnings) and excess annual
additions (and earnings) are taxable in the year of the distribution.
• If excess deferrals are distributed by April 15 of the year following the year of the excess,
the excess deferral is taxed in the year of deferral and earnings are taxed in the year of
the distribution.
• If excess deferrals are distributed after April 15 of the year following the deferral, the
excess deferral amount will be taxed twice—once in the year of deferral and once in the
year of distribution.
Corrective distributions will be reported to the participant on IRS Form 1099-R or IRS Form 1042-S
(if the participant is a nonresident alien). For answers to questions regarding the taxation of corrective
distributions, please consult your tax advisor.
Mailing information
Make a copy of your completed form for your records.
Mail your completed form and any attached information in the enclosed postage-paid envelope.
If you don’t have
a postage-paid
envelope, mail to:
>
Vanguard
P.O. Box 1110
Valley Forge, PA 19482-1110
For overnight
delivery, mail to:
>
Vanguard
455 Devon Park Drive
Wayne, PA 19087-1815
© 2016
The Vanguard Group, Inc.
All rights reserved.
CMDF 112016
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What methodology does Vanguard use to calculate earnings or losses?
Vanguard will calculate earnings or losses at the account level on a pro-rata basis except in cases in which an alternative
calculation method has been applied within the current plan year. To request an alternate calculation methodology, the
plan administrator should attach a separate sheet of instructions.
What action should I take?
If an excess amount has been contributed to the plan, we strongly encourage you to consult your tax advisor, legal
counsel, or third-party administrator to determine the type of excess that applies and how to correct it. See the previous
page for brief descriptions of each excess type and the appropriate action to take with Vanguard. Once the type of excess
has been determined, complete and return the correct form to Vanguard in the postage-paid envelope (if applicable).
Mailing information
Keep a copy of your completed form for your records.
Mail your completed form and any attached information in the enclosed postage-paid envelope.
If you don’t have a postage-paid envelope, mail to:
Vanguard
P.O. Box 1110
Valley Forge, PA 19482-1110
For overnight delivery, mail to:
Vanguard
455 Devon Park Drive
Wayne, PA 19087-1815
Amid all the “noise” in the marketplace about what
you should and shouldn’t do to invest successfully,
we believe the key is to pay attention to the few
things that really matter: low costs, diversification,
and a long-term perspective. Vanguard helps you
stay focused on these essentials—and that can
make a difference in your net investment results.
P.O. Box 1110
Valley Forge, PA 19482-1110
Connect with Vanguard® > vanguard.com > 800-376-9162
© 2016 The Vanguard Group, Inc. All rights reserved.
CMDCV 112016