Correcting a 401(k) excess contribution means asking your plan administrator, in writing, to distribute the excess amount plus any earnings on it back to you before April 15 of the year after you over-contributed. For a 2026 excess, that deadline is April 15, 2027. Miss it and the IRS taxes the same dollars twice: once in the year you contributed them, and again when you eventually withdraw them from the plan.1Internal Revenue Service. Retirement Topics – What Happens When an Employee Has Elective Deferrals in Excess of the Limits
Confirm You Actually Have an Excess
For 2026, you can defer up to $24,500 of salary into all your 401(k) plans combined. If you’re 50 or older, add an $8,000 catch-up for a $32,500 ceiling. If you’re 60, 61, 62, or 63, the SECURE 2.0 catch-up is higher — $11,250 — bringing your maximum to $35,750. At 64, that higher catch-up no longer applies and you drop back to $32,500.2Internal Revenue Service. Retirement Topics – 401(k) and Profit-Sharing Plan Contribution Limits
The document that tells you where you stand is your W-2. Box 12, Code D reports the elective deferrals your employer withheld for the plan that year. If you worked for more than one employer, add the Code D amounts from every W-2 together. A total above your applicable limit is an excess deferral that needs correcting.
The most common way this happens is a mid-year job change. Each employer’s payroll system tracks only its own plan, so if you maxed out at your old job and kept contributing at the new one, nothing automatically stopped you. The IRS puts the tracking burden on you, not on either employer.
Don’t wait for W-2s in January or February if you already suspect an overage. Pull your final pay stub from each job and add the year-to-date 401(k) figures. The earlier you start, the more breathing room you have before April 15.
The Correction, Step by Step
Notify the Plan Administrator in Writing
Contact the plan administrator and request a return of the excess deferral. Your request should state the dollar amount you want returned and explain that your combined deferrals across employers exceeded the annual limit. Attach copies of the relevant W-2s or pay stubs so the administrator can verify the overage. If you contributed to plans at two employers, you get to pick which plan issues the corrective distribution.
Understand What Comes Back With the Excess
The plan doesn’t just return the flat overage. It also has to distribute the net income (or loss) earned on that excess from the date of contribution through the date of distribution. This figure is called the net income attributable, or NIA. The plan administrator calculates it, allocating a proportional share of your account’s gains or losses to the excess amount. If markets were down over that stretch, the NIA can be negative and reduce your distribution.
Hit the April 15 Deadline
The plan must get the excess and its NIA out to you by April 15 of the year after the contribution. Filing a tax extension does not move this deadline. Even if you extend your return to October, the April 15 correction date holds.3Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan
Administrators can be slow, particularly when they need to verify deferrals at another employer. Submit your request in January or February if you can, not late March.
Expect a Form 1099-R
The plan reports the corrective distribution on Form 1099-R. When the excess was contributed in a prior tax year, Box 7 carries distribution Code P, telling the IRS the taxable amount belongs to that earlier year. If the excess is caught and corrected in the same year it was contributed, the plan uses Code 8.4Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498 You’ll need the form when you file.
What Missing April 15 Actually Costs
If the excess stays in the plan past April 15, two things happen. The excess is still included in your taxable income for the year you contributed it. And when you eventually take the money out of the plan, it’s taxed again, because an uncorrected excess deferral does not become part of your cost basis.1Internal Revenue Service. Retirement Topics – What Happens When an Employee Has Elective Deferrals in Excess of the Limits On a $2,000 excess for someone in the 24% bracket, that’s roughly $480 in avoidable federal tax, before state.
Leaving the excess in the plan can also threaten the plan’s tax-qualified status, which would hurt every participant.3Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan That is why administrators generally cooperate on corrections even under time pressure.
If the deadline has already passed and the excess is still in the plan, the money stays there until a normal distribution event: leaving the employer, reaching age 59½, or becoming disabled. There is no way to pull it out early just because it’s excess. You absorb the double-tax cost when you eventually take the distribution.
How the Corrective Distribution Is Taxed
If the excess deferral goes out by April 15, the excess itself is taxable in the year you originally contributed it, and the NIA is taxable in the year you actually receive it.5Internal Revenue Service. Consequences to a Participant Who Makes Excess Annual Salary Deferrals So a 2026 over-contribution corrected in March 2027 puts the excess on your 2026 return and the earnings on your 2027 return.
Timely corrective distributions of excess deferrals are exempt from the 10% early-withdrawal penalty that normally applies before age 59½, regardless of how old you are when the correction is made.6Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
Excesses That Aren’t Yours to Correct
Two other kinds of 401(k) overages exist, and neither is on you to fix. It’s worth knowing what they are so you don’t chase a correction that isn’t yours.
The annual addition limit caps total contributions to your account from all sources — your deferrals, the employer match, any profit-sharing — at $72,000 for 2026, or 100% of compensation if that’s less. Catch-up contributions sit outside this figure.7Internal Revenue Service. IRS Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs Exceeding it is almost always driven by employer contributions, and the employer handles the correction under the terms of the plan document. Confirm with your administrator that the fix happened; that’s usually the extent of your role.
The ADP and ACP nondiscrimination tests compare contributions by highly compensated employees against everyone else. You’re an HCE for 2026 if you earned more than $160,000 from the employer in the prior year.8Internal Revenue Service. COLA Increases for Dollar Limitations on Benefits and Contributions If the plan fails these tests, the plan sponsor corrects at the plan level, sometimes by returning contributions to HCEs. Corrective distributions from ADP/ACP failures are taxable in the year distributed, not the year contributed — a different rule from the excess-deferral rule above. Safe harbor plans satisfy the tests automatically and avoid this scenario.9Internal Revenue Service. 401(k) Plan Fix-It Guide – The Plan Failed the 401(k) ADP and ACP Nondiscrimination Tests
If you’re the employee who over-deferred across two jobs, ignore both of those tracks. Your fix is the written request to the plan administrator, before April 15, for the excess plus its earnings.