If you contributed more than the annual 402(g) limit to your 401(k), you correct the mistake by asking the plan to return the excess, plus the earnings it generated, before April 15 of the year after the excess occurred. That is the short version of how to correct 401(k) excess deferrals. For 2026 contributions, the standard limit is $24,500, and the corrective distribution has to be in your hands by April 15, 2027.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Miss that date and the same dollars get taxed twice.2Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees’ Trust
Confirm You Actually Have an Excess
The 402(g) cap is an individual limit that applies across every 401(k), 403(b), governmental 457(b), Thrift Savings Plan, and SIMPLE plan you participate in during the year, combined.3Internal Revenue Service. How Much Salary Can You Defer if You’re Eligible for More Than One Retirement Plan For 2026 that is $24,500 for most workers. If you are 50 or older, you can defer an extra $8,000 catch-up, for a total of $32,500. Participants aged 60 through 63 get an enhanced catch-up of $11,250 under SECURE 2.0, bringing their ceiling to $35,750.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
Pre-tax and designated Roth deferrals both count toward the same cap, so a Roth 401(k) does not give you a second bucket. The most common reason people go over is holding two jobs in the same year, since each employer’s payroll only tracks its own plan. If you deferred $15,000 at one job and $12,000 at another, you are $2,500 over. Catching that is on you, not the employers.2Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees’ Trust Add up your final pay stubs and W-2 box 12 amounts (codes D, AA, E, BB, G, and S depending on plan type) before the calendar turns.
The Two Deadlines That Control Everything
Section 402(g) builds in two hard dates for a timely correction:
- March 1 of the year after the excess: notify each plan from which you want the excess returned.
- April 15 of that same year: the plan must actually distribute the excess plus allocable earnings to you.2Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees’ Trust
A tax-return extension does not move the April 15 distribution deadline. The corrective distribution date is set by statute and runs on its own clock, independent of when you file your Form 1040. Start early. Plans need time to calculate earnings and cut a check, and a February phone call is much safer than a late-March one.
How to Request the Corrective Distribution
Call the plan administrator or your employer’s benefits office and ask for the excess deferral correction form. Different recordkeepers name it differently — some use a general Distribution Request Form, others have a dedicated 401(k) Excess Deferral Correction Form. Many now accept the request through an online participant portal, which is usually faster.
On the form you certify the dollar amount of the excess. If two unrelated employers were involved, you choose which plan sends the money back; picking the one with the larger excess keeps the paperwork simple, but either can process the return. You also pick how you want to receive the funds, by check or direct deposit.
One rule catches people off guard: a corrective distribution of excess deferrals cannot be rolled over to an IRA or another retirement plan. The money was never eligible for tax-deferred treatment, so rolling it over would defeat the correction. Send it to a taxable account.
What You Will Actually Receive
The check will not match your excess to the penny. The plan has to return the excess deferral plus the net investment income (or loss) attributable to it while it sat in the account. Treasury Regulations spell out the method.4eCFR. 26 CFR 1.402(g)-1 – Limitation on Exclusion for Elective Deferrals The plan also accounts for earnings during the gap period between year-end and the actual distribution date.
If your investments lost value, the allocable amount is negative and you get back less than the excess. If they gained, you get back more. You do not run this math yourself — the plan does — but expect the distribution to differ from the raw excess figure.
How a Timely Correction Is Taxed
When the distribution happens by April 15, the excess deferral itself is taxable in the year you originally contributed it. A 2026 excess corrected in March 2027 goes on your 2026 return. The allocable earnings, on the other hand, are taxed in the year the money is paid out.5Internal Revenue Service. Consequences to a Participant Who Makes Excess Annual Salary Deferrals
The plan will send you a Form 1099-R. Distribution Code P signals that the income belongs to the prior tax year; Code 8 is used when the excess and the correction happen in the same calendar year.6Internal Revenue Service. Instructions for Forms 1099-R and 5498 Check that the 1099-R amounts match your records, and adjust the wages on your return to include the excess if the W-2 does not already reflect it. Your employer may also issue a Form W-2c to reconcile payroll records with the distribution.7Internal Revenue Service. About Form W-2 C, Corrected Wage and Tax Statements Mismatches between the W-2 and 1099-R are a common trigger for automated IRS notices.
One piece of good news: a timely corrective distribution is exempt from the 10 percent early withdrawal penalty that normally applies before age 59½.8Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions That exemption applies only when you meet the April 15 deadline.
What Happens If You Miss April 15
This is where the cost multiplies. The excess is taxed in the year you contributed it and then taxed again in the year the money is eventually paid out of the plan.2Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees’ Trust That second event might be years away, whenever you leave the employer or take a distribution. Earnings are taxed in the year of distribution.
You also lose the exemption from the 10 percent early withdrawal penalty. A late corrective distribution can trigger the penalty if you are under 59½, stacking a third cost on the mistake.9Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Weren’t Limited to the Amounts Under IRC Section 402(g) for the Calendar Year and Excesses Weren’t Distributed
If the Excess Came From One Employer
When a single employer’s plan let you exceed the limit, the plan sponsor has a route through the IRS Employee Plans Compliance Resolution System to fix it, including a Self-Correction Program that does not carry IRS user fees.9Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Weren’t Limited to the Amounts Under IRC Section 402(g) for the Calendar Year and Excesses Weren’t Distributed The excess is still reported as taxable in both the year of deferral and the year of distribution, but at least the plan has a path forward. Flag the problem to the benefits office as soon as you spot it.
If the Excess Came From Multiple Employers
When each plan stayed within its own limit but your combined deferrals crossed the 402(g) cap, no single plan failed and EPCRS does not apply. If you missed the March 1 notification, the excess simply stays in whichever plan you did not tell, and the double taxation hits when you eventually distribute it. There is no cleanup mechanism in this scenario, which is why totaling your deferrals across every employer before December 31 matters so much.