<prompt> Human: Asking this question for my dad. Long story short is that hes receiving a 22k lump sum disbursement payout from his 401k. He put about 24k away during 2017 pre-tax into his 401k. HR got a hold of him and told him, basically, our plan is regulated differently than some other 401ks, because of that we are audited every year, in 2017 we had too many high income members of the plan, and money is being sent back to employees less 10 for federal taxes, and they say this number was told to the HR team by IRS.First off were both skeptical of HR and their explanation, the 10 federal tax number, the rationale for kicking back money to employees, etc. Can anyone speak to this situation?Second is what should he do with the 22k? Hes receiving the payout in 2018 but earned and originally deposited the money into his 401k in 2017. Hes looking to avoid paying taxes on it as it was money he planned to go into his 401k pre-tax. He files jointly with a household income of about 200k - 20k in bonus. Hed like to move it all somewhere in bulk, but would break it up into different vehiclesaccountsetc to avoid the taxes.Thoughts? X-posting to rtax. Thanks.  <response>: First off were both skeptical of HR and their explanation, the 10 federal tax number, the rationale for kicking back money to employees, etc. Can anyone speak to this situation?This is a real thing, 401ks are really audited for it, and they really do return overcontributions by the highly compensated. Second is what should he do with the 22k? Its reportable income for 2017. Theres really no normal way that he can avoid paying taxes on it, so it is probably best to eat the 7,000 in taxes, stick it in a brokerage, and invest it.EDIT: On reread, verify that the 10 was actually withheld for federal taxes. If HCE contributions are not refunded by March 15th, the company not employees pay a 10 penalty, and itd be a shame if they were simply passing that along. 