Excess 401(k) Deferrals: Deadlines, Correction, and Taxes

If you contributed more than the annual 401(k) deferral limit across your plans, the correction for excess 401(k) deferrals has two firm dates: notify each plan administrator of the overage by March 1 of the year after the contribution, and have the plan distribute the excess plus its earnings back to you by April 15. Miss April 15 and the money gets taxed twice — once for the year you contributed it and again when you eventually pull it out in retirement.¹

The Section 402(g) limit for 2026 is $24,500, counting every elective deferral you made across all 401(k), 403(b), SIMPLE, and governmental 457 plans combined, pre-tax and Roth together.² Add $8,000 if you’re 50 or older, or $11,250 if you turn 60, 61, 62, or 63 during the year. Employer matching doesn’t count toward this ceiling — only what came out of your paycheck.

Confirm the Excess Amount

Pull every Form W-2 from the year in question and look at Box 12 for these codes:

Code D — pre-tax 401(k) deferrals
Code AA — designated Roth 401(k) contributions
Code E — 403(b) salary reduction contributions
Code S — SIMPLE plan salary reduction contributions

Add up every dollar under those codes across all your W-2s.³ Anything above your applicable limit is the excess that has to come out. Roth and traditional contributions share the same ceiling: $15,000 pre-tax plus $12,000 Roth puts you $2,500 over even though neither bucket alone crossed the line.

This most often happens when you change jobs mid-year — each employer’s payroll only tracks its own plan, so nobody flags the combined total. Participating in two plans at once (a main job plus a side gig with its own retirement plan) creates the same risk. The 402(g) limit is per person, not per plan, and monitoring the total is on you.⁴ You don’t have to wait for W-2s — the final pay stubs from each job carry the same numbers and let you start earlier.

The Two Deadlines That Matter

By March 1 of the year after the deferral, tell each plan administrator how much of the excess you want allocated to their plan.⁴ If the entire excess came from your second job, you notify only that plan. If contributions overlapped, you get to decide how to split the amount between plans. Contact HR or the plan’s participant service line and put the request in writing.

By April 15, the plan has to distribute the excess to you along with any earnings it generated through December 31 of the deferral year. Only earnings inside the calendar year of the deferral get included; gains or losses in the gap period between January 1 and the actual payout aren’t part of the corrective distribution. This April 15 deadline is firm. Filing a tax extension does not push it out.⁵

When the correction happens on time, none of the usual early-distribution rules kick in. No 10% penalty under Section 72(t), no mandatory 20% federal withholding, and no spousal consent requirement.⁶ Start the conversation early in the new year. Plans need lead time to calculate earnings and cut the check.

How a Timely Correction Gets Taxed

For a pre-tax excess deferral returned by April 15, the principal is taxable in the year you made the deferral, not the year the refund lands.⁴ If your W-2 already showed the excess as taxable wages, the principal is already reflected on your return. If it didn’t, add the amount as other income on Form 1040.

Earnings are taxed separately, in the year the distribution actually happens.⁷ So a 2025 over-contribution corrected in early 2026 splits across two returns: the excess principal on the 2025 return, the earnings on the 2026 return.

Roth excess deferrals work the same way on earnings but differently on principal. Because Roth contributions were already after-tax, you don’t owe additional tax on the returned principal.⁸ The earnings piece is still taxable in the year of distribution.

What the 1099-R Will Show

The plan issues Form 1099-R to document the corrective distribution, and Box 7 tells you which year the money belongs on:

Code P — taxable in the prior year. The principal portion of a timely correction typically carries this code.
Code 8 — taxable in the current year. The earnings portion carries this code because earnings are taxed when distributed.

The plan may issue two separate 1099-Rs or combine the codes on one form.⁷ The 1099-R covering the prior-year amount doesn’t arrive until the following January, which often means you’ll file your return before it shows up. Don’t wait. Report the excess on the return for the contribution year. If you already filed without it, submit Form 1040-X to amend.

Missing the April 15 Deadline

Late corrections carry the double-tax outcome the timely process is designed to prevent. The excess is taxed in the year you contributed it and taxed again when it eventually comes out of the plan. Late distributions can also trigger the 10% early distribution penalty if you’re under 59½, along with the mandatory 20% withholding and spousal consent rules that timely corrections avoid.⁶ Employer-side correction programs exist to protect the plan’s qualified status, but they don’t undo the participant-level tax hit.

Refunds From Failed Nondiscrimination Testing

Not every unexpected refund from your 401(k) is a 402(g) excess deferral. If your plan fails its annual ADP or ACP nondiscrimination test, the plan sponsor refunds excess contributions to highly compensated employees to bring the plan back into compliance.⁹ The plan initiates that refund on its own timeline, and you don’t request it. Include the amount on your tax return for the year you receive it, using the 1099-R the plan issues.

1
Internal Revenue Service. Consequences to a Participant Who Makes Excess Annual Salary Deferrals
2
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
3
Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3
4
Office of the Law Revision Counsel. 26 USC 402(g) – Limitation on Exclusion for Elective Deferrals
5
Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan
6
Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Werent Limited to the Amounts Under IRC Section 402(g)
7
Internal Revenue Service. Instructions for Forms 1099-R and 5498
8
eCFR. 26 CFR 1.402(g)-1 – Limitation on Exclusion for Elective Deferrals
9
Internal Revenue Service. 401(k) Plan Fix-It Guide – The Plan Failed the 401(k) ADP and ACP Nondiscrimination Tests