Do Section 415 Limits Apply Separately to Two Employers?

Section 415 limits do apply separately to two employers, but only when those employers are genuinely unrelated under the tax code. If the two businesses share enough common ownership or the right kind of service relationship, the IRS treats them as one employer and you get one combined limit instead of two. For 2026, a full separate limit means up to $72,000 per employer in annual additions to a defined contribution plan, or 100 percent of your compensation at that employer if lower. A separate cap on your own salary deferrals runs across every job you hold, related or not, and that’s usually the ceiling people hit first.

The 2026 Numbers at Stake

Section 415 caps contributions two ways. For a defined contribution plan such as a 401(k) or profit-sharing plan, total annual additions to your account cannot exceed the lesser of $72,000 or 100 percent of your compensation for the year.¹ Annual additions include your salary deferrals, employer matching, employer nonelective contributions, and forfeitures allocated to your account.²

For a defined benefit plan, the annual retirement benefit cannot exceed the lesser of $290,000 or 100 percent of your average compensation during your three highest-paid consecutive years.¹

The 100 percent of compensation piece matters more than the dollar figure for anyone with a modest second job. If your second employer pays you $40,000, the Section 415 limit at that employer’s plan is $40,000, not $72,000.

What “Unrelated” Actually Means

When two employers share no common ownership and no service-group connection, each plan gets its own Section 415 limit. What one plan contributes has no bearing on the other. An employee at a large public company who also works nights for an independent small business could receive up to $72,000 in annual additions from each plan, subject to the compensation ceiling at each job.

Relatedness is a matter of ownership and, in some cases, service relationships. Two companies in the same industry are unrelated if no one owns both. Two companies in completely different fields are related if the same people own both. Who signs the checks is the question, not what the businesses do.

When the IRS Collapses Two Employers Into One

Under IRC Section 414, all employees of every entity in a controlled group are treated as employed by a single employer for Section 415 purposes, and all plans within the group are tested against one combined limit.³ Two structures trigger this.

Parent-Subsidiary Groups

A parent-subsidiary controlled group exists when one entity owns at least 80 percent of the voting power or total share value of another.⁴ The chain can extend through multiple tiers. If Corporation A owns 80 percent of Corporation B, which owns 80 percent of Corporation C, all three are in the same group.

Brother-Sister Groups

A brother-sister controlled group exists when five or fewer individuals, estates, or trusts own both at least 80 percent of each entity and more than 50 percent of each entity on an “identical ownership” basis, counting each owner’s stake only up to the lowest percentage they hold in any of the entities.⁴ The 80 percent test looks at combined ownership; the 50 percent identical-ownership test blocks people from gaming the rules with lopsided stakes.

Family Attribution

Ownership is determined using constructive ownership rules, which attribute stock or interests held by spouses, children, grandchildren, and parents back to the individual being tested.⁵ A husband who owns 60 percent of one business and a wife who owns 70 percent of another may be treated as owning both stakes. This is where owners who assume their businesses are unrelated get surprised.

The Lower 50 Percent Threshold for Owners

Here is the wrinkle that catches business owners. For most retirement plan rules, the controlled group threshold is 80 percent. Section 415 uses a lower bar. When testing whether Section 415 limits must be combined, the statute substitutes “more than 50 percent” for the normal “at least 80 percent” threshold in the parent-subsidiary definition.⁶

The practical effect: if you own more than 50 percent of two businesses, those businesses are a controlled group specifically for Section 415, even if they wouldn’t be a controlled group for other retirement plan rules. A sole proprietor who owns 100 percent of a consulting firm and 100 percent of a property management company cannot receive full Section 415 contributions from both plans. Combined annual additions across both are capped at a single $72,000 (or 100 percent of the owner’s combined compensation, if lower).

This lower threshold applies only to the owner and anyone whose contributions are affected by the aggregation. Non-owner employees who work at just one entity keep their separate limits unless the entities also meet the standard 80 percent controlled group tests.

Affiliated Service Groups

Even without common ownership, businesses can be forced into aggregation as an affiliated service group under IRC Section 414(m). This rule targets service organizations that are intertwined, such as a medical practice that regularly sends patients to an imaging center in which one of the doctors holds an ownership stake.⁷

An affiliated service group forms when one service organization is a shareholder or partner in another, and the two regularly perform services together or for each other. It also covers situations where a separate entity performs services historically done by employees of the first organization, and highly compensated employees of the first organization hold 10 percent or more of the second entity.⁷ Section 415 is one of the rules that applies on an aggregated basis to affiliated service groups. Medical groups, law firms, accounting partnerships, and engineering firms are the most common targets.

The Deferral Cap That Follows You Everywhere

Even when Section 415 limits are completely separate, a different cap always applies on a per-person basis. Under Section 402(g), for 2026 you can exclude only $24,500 in salary deferrals from your taxable income across every 401(k), 403(b), SIMPLE, and governmental 457 plan combined.⁸ Whether the employers are related makes no difference. Two independent jobs, two different 401(k) plans, one deferral limit across both.⁹

This is where most people with two jobs actually hit a ceiling. If you defer $24,500 into your primary employer’s 401(k), you cannot defer anything into your second employer’s plan. Employer matching and profit-sharing at the second job can still go in up to that plan’s full $72,000 Section 415 limit, but your own paycheck contributions are used up.

Catch-up contributions add room if you are old enough. Participants age 50 and older can defer an additional $8,000 in 2026, bringing the total possible deferral to $32,500. Participants aged 60 through 63 get a higher catch-up of $11,250 under SECURE 2.0, for a total deferral of $35,750.⁸ These catch-up limits are also per person across all plans. Neither employer can see what the other plan is doing in real time, so the burden falls on you to monitor your total deferrals and request a correction before the tax filing deadline if you go over.

What Happens if the Limit Is Blown

When contributions exceed the Section 415 limit, whether because aggregation was missed or the math was wrong, the plan has “excess annual additions” that must be corrected. The plan administrator distributes the excess, adjusted for any earnings or losses attributable to it, back to the participant.¹⁰

The corrective distribution is included in the participant’s taxable income for the year of the correction, not the year the excess was originally contributed. The IRS waives the 10 percent early distribution penalty that would otherwise apply before age 59½.¹⁰ For salary deferral contributions, the correction follows a priority order: unmatched deferrals go out first, then matched deferrals, with the associated employer match forfeited.

If excess contributions go uncorrected entirely, a plan that exceeds Section 415 limits fails to qualify as a tax-exempt trust, which could expose the entire plan’s assets to immediate taxation for all participants.² In practice the IRS usually pushes for correction rather than disqualification through its Employee Plans Compliance Resolution System, but the leverage exists.

1
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs
2
Office of the Law Revision Counsel. 26 US Code 415 – Limitations on Benefits and Contribution Under Qualified Plans
3
Office of the Law Revision Counsel. 26 US Code 414 – Definitions and Special Rules
4
Office of the Law Revision Counsel. 26 USC 1563 – Definitions and Special Rules
5
Office of the Law Revision Counsel. 26 US Code 318 – Constructive Ownership of Stock
6
Office of the Law Revision Counsel. 26 US Code 415 – Limitations on Benefits and Contribution Under Qualified Plans – Section 415(h)
7
Office of the Law Revision Counsel. 26 US Code 414 – Definitions and Special Rules – Section 414(m)
8
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
9
Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust – Section 402(g)
10
Internal Revenue Service. Fixing Common Plan Mistakes – Failure to Limit Contributions for a Participant