Bad handling of 401k

[bmozaffari]

Hi all,

I've done some bad planning on my 401k. I am changing jobs and contributing $6000 was enough to get maximum employer match ($3000) from my current employer, but I contributed $15,000, close to the cap.

I am now starting a new job that will contribute 50% for $8000 of my 401k contributions, but I have no room to contribute. Is there any way to make this happen?

1- Can I take a hardship withdrawal, or do I need to show genuine hardship? I know there is a 10% penalty, but 50% matching would make up for it, and I'd get back to the cap 401k contribution by the end of the year, so the income tax on the withdrawal would be compensated.

2- If I contribute $8000 ignoring my previous 401k, I would be over contributing by $7,500. As I understand, the excess would have to be withdrawn and taxed, and that's fine by me, as long as it's taken from the old 401k plan or otherwise stops the matching funds from being touched. Is that an option?

Thanks, Bobby

[Mark T Serbinski CA CPA]

Aggregate contributions to your 401(k) plans in any year in excess of the allowed maximum will automatically trigger the inclusion of the excess amount in income for the year of the contribution.

The fact that this happens, however, is a tax issue only, and should not in any way affect your new employer's matching contribution, which occurs as a matter of company policy based only on the contributions made to that employer's plan.

I think I would just make the required contributions to the new plan, accept the matching, and deal with the tax consequences on filing your 2007 return.