If you contributed to 401(k) plans at two employers in the same year and your combined salary deferrals exceeded the annual limit, you fix it by asking one or both plan administrators, in writing, to make a corrective distribution of the excess amount plus its earnings, and the distribution must be completed by April 15 of the year after the contribution year. Excess 401(k) contributions with two employers happen because unrelated payroll systems don’t talk to each other, so nobody but you can catch the overage. The good news is that the correction itself is clean if you move in time. The bad news is what happens if you don’t.
Why Two Employers Creates the Problem
The IRS caps how much you personally can defer from your paycheck into 401(k) plans each year. For 2026, the standard limit is $24,500. If you’re 50 or older by December 31, you can add an $8,000 catch-up, for $32,500. If you turn 60, 61, 62, or 63 during the year, the SECURE 2.0 enhanced catch-up is $11,250 instead of $8,000, bringing the ceiling to $35,750.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
That limit is yours, not the plan’s. It applies across every 401(k) you participate in. When you have two unrelated employers, each plan administrator sees only what you deferred through their payroll, so each will happily accept the full annual amount. Nobody flags the overage. You have to.2Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan
Calculating the Excess
Pull every Form W-2 you received for the year. Each employer reports 401(k) salary deferrals in Box 12 with Code D. Add up the Code D amounts across all your W-2s. That total is what you deferred.
Subtract the limit that applies to you: $24,500 if you’re under 50, $32,500 if you’re 50 or older, or $35,750 if you’ll be 60 through 63 during the tax year. Anything left over is your excess deferral, and that’s the number you need to get out of a plan.
Neither W-2 is wrong. Each employer accurately reported what you deferred with them. The overage is a personal-limit problem, not a payroll error, so don’t wait for corrected W-2s.
Requesting the Corrective Distribution
Pick which plan you want the excess to come out of. You can pull the entire amount from one plan or split it across both. Then send a written request to the plan administrator that includes the dollar amount you’re designating as excess from that plan, how you arrived at that number, and a clear request for a corrective distribution.
Under the federal statute, you have until March 1 following the close of the tax year to allocate the excess and notify each plan administrator.3Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust That March 1 date isn’t the hard cutoff, but it exists for a reason: the plan needs processing time. Waiting until early April is a bet on turnaround speed you don’t control.
The hard deadline is April 15 of the year after the contribution year. For a 2025 excess, the corrective distribution has to happen by April 15, 2026; for a 2026 excess, by April 15, 2027.2Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan Filing an extension on your tax return does not move this deadline. Even if your 1040 is on extension to October, the April 15 correction date stays fixed.
What the Distribution Includes and Excludes
The plan distributes the excess deferral plus any earnings attributable to it (or minus losses). The plan handles that earnings calculation, covering the period from when the excess was contributed through the distribution date.4eCFR. 26 CFR 1.402(g)-1 – Limitation on Exclusion for Elective Deferrals
A timely corrective distribution isn’t treated like a regular early withdrawal. There’s no 10% early withdrawal penalty, regardless of your age.5Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions There’s no 20% mandatory federal withholding. And the plan doesn’t need spousal consent even if it ordinarily would for a distribution.6Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Werent Limited to the Amounts Under IRC Section 402(g) for the Calendar Year and Excesses Werent Distributed
One thing you may lose: if your employer made matching contributions on the excess dollars, that match is typically forfeited back to the plan, because the match was calculated on contributions that turn out to be invalid.
How the Corrective Distribution Is Taxed
The tax treatment splits across two years, which is where most of the confusion lives.
The excess deferral itself is taxable in the year you originally contributed it. A 2026 excess is 2026 income, even though the check arrives in early 2027. The earnings on the excess are taxable in the year you actually receive the distribution.6Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Werent Limited to the Amounts Under IRC Section 402(g) for the Calendar Year and Excesses Werent Distributed
You’ll get one or two Forms 1099-R. Box 7 codes tell the IRS which year each portion belongs to. Code P flags the excess deferral as prior-year income. Code 8 flags the earnings as current-year income.7Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
Because your payroll originally excluded the pre-tax excess from your wages, you have to add it back as income. Report the excess as wages on your Form 1040 for the contribution year. If you haven’t filed yet, fold it into your wage income before you file. If you’ve already filed, you aren’t required to amend. The IRS lets you report the prior-year excess on the following year’s return instead, though you should attach a brief statement explaining what you’re doing.6Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Werent Limited to the Amounts Under IRC Section 402(g) for the Calendar Year and Excesses Werent Distributed
Choosing Between a Roth and a Traditional Account
The annual deferral limit covers pre-tax and Roth 401(k) contributions combined. The correction mechanics are the same either way: notify the plan administrator, get the distribution by April 15, earnings come out with the principal.2Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan
The tax difference matters if you have a choice. Roth contributions were already made with after-tax dollars, so returned Roth principal isn’t taxed again on distribution; only the earnings are taxable in the year received. Pulling the excess from a traditional account means the returned principal is taxable in the contribution year on top of the earnings being taxable in the distribution year. If one plan is Roth and one is traditional and you’re free to choose, taking the excess from the Roth side usually produces the cleaner tax outcome.
Missing the April 15 Deadline
This is where the situation shifts from a paperwork inconvenience to a lasting tax problem. If pre-tax excess deferrals stay in the plan past April 15, the principal is taxed twice: once in the contribution year, and again when it comes out of the plan later, whether that’s in retirement or earlier.2Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan The IRS does not credit basis in your account for the amount that was double-taxed, so you can’t offset the later distribution with the tax you already paid.
The 10% early withdrawal penalty exemption also disappears. Any future distribution of those excess funds to someone under 59½ will face the penalty.6Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Werent Limited to the Amounts Under IRC Section 402(g) for the Calendar Year and Excesses Werent Distributed
Correction may still be possible through the IRS Employee Plans Compliance Resolution System (EPCRS), but that program is primarily a tool for the plan sponsor to protect the plan from disqualification. It doesn’t undo the double-taxation exposure for you as the employee.6Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Werent Limited to the Amounts Under IRC Section 402(g) for the Calendar Year and Excesses Werent Distributed If you discover the problem after April 15 and your plan administrator is unresponsive, a tax professional who specializes in retirement plans is worth the cost.
How to Keep This From Happening Again
If you work two jobs at once or switch employers mid-year, track combined deferrals as you go instead of waiting for W-2s in January. Decide upfront which employer’s plan gets the bulk of your contributions, and set the other plan’s deferral rate low enough that the combined total can’t exceed the annual limit.
When you change jobs, get your year-to-date 401(k) deferrals from your former employer’s payroll team or your final pay stub. Hand that number to your new employer’s HR contact and set your new deferral rate around it. Some administrators let you set a hard dollar cap instead of a percentage, which stops contributions automatically once you hit the limit.
If you’re already over and you know it, don’t wait. The April 15 deadline doesn’t care when you noticed. Gather the W-2s, run the math, and get a written request to the plan administrator with several weeks of cushion before the deadline. Processing delays are out of your hands, and they don’t extend the cutoff.