Contributed Too Much to Your 401(k)? How to Fix a 402(g) Excess Deferral Before April 15

You switched jobs in July, signed up for the new 401(k) on day one, and maxed out contributions at both employers. Smart move — except nobody told your second payroll department what your first one already withheld. Now your W-2s show $27,500 in elective deferrals against a $24,500 limit, and you have until April 15 to pull the excess back out. Miss that deadline and the same dollars get taxed twice: once in the year you earned them, and again when you eventually withdraw them in retirement.

This is the 402(g) excess deferral trap, and it catches diligent savers far more often than it catches anyone trying to game the system. Here is how it happens, how to fix it, and what it costs if you ignore it.

Why Your 401(k) Can Overflow Without Anyone Warning You​

Your employer tracks only what you contribute to its plan. The IRS limit, by contrast, applies to you — across every plan you touch in a calendar year. Each payroll system enforces the cap in isolation, so nothing stops the combined total from sailing past the limit.

The most common overflow scenarios:

• You changed jobs mid-year. Old plan took $14,000, new plan took $12,000. Neither plan sees a problem. Together you are $2,000 over.
• You contribute to two plan types. Elective deferrals to a 401(k), a 403(b), a SIMPLE IRA, and a SARSEP all share a single 402(g) limit. Maxing a 401(k) at your day job while deferring into a 403(b) from side teaching work stacks toward the same ceiling.
• You misunderstood the catch-up rules. Workers 50 and older get extra room, but the base limit and the catch-up are separate numbers. Deferring the under-50 maximum plus a little extra "just in case" without formally electing catch-up contributions can create a small excess.
• A bonus or true-up pushed you over late in the year. A December bonus with a fixed deferral percentage can tip a nearly-full account over the line after payroll stops checking.

One important exception: 457(b) plans have their own separate limit. Deferrals to a governmental 457(b) do not count against the 402(g) ceiling, so maxing both a 401(k) and a 457(b) in the same year is legitimate. Confusing a 457(b) with a 403(b) — easy to do when a hospital or university offers both — is how some savers under-contribute out of caution and others over-contribute by accident.

The 2026 Limits You Are Measuring Against​

For 2026, the elective deferral limit under section 402(g) is $24,500, up from $23,500 in 2025. Catch-up contributions for participants age 50 and older add $8,000, for a total of $32,500. Workers who turn 60, 61, 62, or 63 during the year are eligible for the higher "super catch-up" of $11,250, for a total of $35,750 — though that richer limit only applies if your employer's plan adopts it, so confirm before you rely on it.

A nuance that saves many older savers: catch-up contributions do not count against the 402(g) limit. The limit is tested first, and deferrals above it are reclassified as catch-up contributions up to the catch-up cap. If you are 50 or older and your plan correctly characterizes the overflow as catch-up, there is no excess at all — you would need to blow past $32,500 (or $35,750 at ages 60–63) before a real problem exists.

Also new for 2026: higher-earning participants may find their catch-up contributions must go in as Roth. Under a SECURE 2.0 provision now in effect, employees whose prior-year wages exceeded the threshold have catch-up contributions treated as after-tax Roth contributions. That changes the tax character of the dollars but not the arithmetic of the limit — track the totals the same way.

The April 15 Fix, Step by Step​

If your combined deferrals for the year exceed your personal limit, the correction is straightforward but deadline-driven. Both halves of it land on April 15 of the following year:

1. Add up every elective deferral. Pull Box 12, Code D amounts from every W-2 (Code W for SIMPLE, Code S for SARSEP salary reductions, 403(b) elective deferrals too). Compare the total against your limit for the year — $24,500 for most savers in 2026, plus catch-up room if you qualify.
2. Calculate the excess. Total deferrals minus your limit. If the result is zero or negative, stop — you have nothing to fix.
3. Notify the plan administrator in writing by April 15. Tell them the dollar amount of excess to distribute to you. If more than one plan holds your money, you choose which plan (or plans) the refund comes from — a useful lever if one plan has better investments you would rather leave untouched beyond the required refund.
4. The plan pays you the excess plus allocable earnings by April 15. The refund must include the investment gains (or losses) attributable to the excess while it sat in the account. Most administrators compute this with a reasonable allocation method; you do not calculate it yourself.
5. Report it correctly at tax time. The excess itself counts as wages in the year you contributed it — it should already appear in Box 1 of that year's W-2. The earnings count as income in the year they are distributed. You will receive a Form 1099-R documenting the refund: Code P marks the prior-year excess portion, Code 8 marks earnings taxable in the current year. Report the excess as wages on the original year's return (amend if you already filed without it), and pick up the earnings in the year of distribution.

Two pieces of good news inside this process: the corrective refund is not subject to the 10% early-distribution penalty, even if you are under 59½, and the refund does not count against the current year's contribution limit — it is last year's money coming home, not new savings.

A special note on Roth excess deferrals​

If the excess came from designated Roth contributions, the mechanics are the same but the tax outcome has an extra wrinkle: the excess was already after-tax, so the principal is not taxed again on the way out — only the earnings are. After a missed deadline, though, Roth excess gets genuinely messy, because the plan must still get the money out eventually while the basis tracking tangles. Roth overflow deserves a same-week call to your plan administrator, not a wait-and-see approach.

What Happens If You Miss April 15​

This is the expensive part, and it has two layers — yours and your employer's.

Your layer: double taxation. An excess deferral that is not withdrawn by April 15 is taxed in the year contributed (it stays in your wages) and taxed again when it is eventually distributed from the plan. The earnings are taxed on distribution as well. There is no statute of limitations trick here and no self-correction later: the excess sits in the account as after-tax money with no basis record to protect it, so the second tax lands in full whenever the dollars come out — potentially decades later, with decades of growth attached.

Your employer's layer: plan qualification risk. A plan that retains excess deferrals past April 15 violates the qualification rules, and every affected plan of that employer is exposed — not just your account. The IRS's fix-it guide routes these failures into the Employee Plans Compliance Resolution System (EPCRS), where the employer pays a compliance fee and follows a prescribed correction. Even under EPCRS, the double taxation stands; the program saves the plan's tax-qualified status, not your wallet.

The asymmetry is the point: the employer has a formal correction program with fees and paperwork, while you simply pay tax twice. That is why the April 15 notification is your job even though the error often originates in payroll systems you do not control.

How to Keep It From Happening Again​

Prevention is mostly a tracking problem, and tracking problems are solvable:

• Keep a running deferral total across employers. A simple spreadsheet with one row per paycheck — date, employer, amount deferred — takes thirty seconds per pay period and catches overflow by October instead of next March. Total it in December, not April.
• Tell your new employer's payroll about old-plan contributions. When you onboard mid-year, give HR your year-to-date deferral figure in writing and ask them to cap your contributions accordingly. Most payroll systems accept a custom annual cap.
• Set dollar caps, not just percentages. A 15% election that was perfect at your salary in January becomes an overflow machine after a mid-year raise or bonus. Convert your target to dollars, divide by remaining paychecks, and reset the percentage.
• Mind December bonuses. If your plan pulls deferrals from bonus pay, model the bonus before it pays. One oversized December withholding is the classic source of a $400 excess that costs more in hassle than it ever earned in match.
• Remember the aggregation rule — and the 457(b) exception. 401(k) plus 403(b) plus SIMPLE plus SARSEP share one limit; a governmental 457(b) stands alone. If you work two jobs with different plan types, write down which bucket each dollar falls into.
• Coordinate married couples separately. The limit is per person, not per household. Two spouses can each contribute the full amount; neither spouse's contributions affect the other's cap.

What Small Employers Should Watch​

If you sponsor a plan, excess deferrals are partly your participants' tracking failure and partly your payroll's blind spot. A few controls pay for themselves:

• Ask new hires for year-to-date deferrals during onboarding and store the figure where whoever runs payroll can see it.
• Flag participants approaching the limit in Q4, especially high earners with catch-up elections and anyone who joined mid-year.
• Calendar the April 15 distribution deadline alongside your other plan deadlines. A missed refund converts a routine correction into an EPCRS filing with fees.
• Keep the paper trail. The participant's written excess notice, your distribution calculation, and the 1099-R reporting position should live together in the plan file. If the IRS ever asks how an excess was handled, contemporaneous records are the entire defense.

Keep Your Payroll and Savings Records in One Place​

Excess deferrals are, at bottom, a recordkeeping failure: two payroll systems that never talked to each other, and a saver with no single ledger showing the combined total until tax season. The savers who catch overflow in November are the ones who track every paycheck in one place — deferrals, employer match, bonuses, and all.

Beancount.io gives you that single place: plain-text accounting that is transparent, version-controlled, and ready for analysis, so your year-to-date numbers are always one query away instead of scattered across pay stubs. Get started for free and make next December's limit check a five-minute exercise instead of an April surprise.