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Just when everything is going GREAT I open the mail and find some fluffy letter from my 401K provider about some corrective distribution (a sizeable amout) which is being returned to me. Basically it states that an HCE (highly compensated employee) is compared to a non-HCE and the IRS makes an adjustment to make life balanced. How nice!!!!

I was under the impression there is a $9500 cap on 401K contributions. Last year I maxed out and never played this game with the IRS.

Can anyone explain to me if this is correct and standard policy? and if so advise what my best options are to keep this as retirement (tax exempt money). I was not informed of this in advance to make corrections by my provider. Are they required to do so?

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