Elective Deferral Limit Under Section 402(g) — What Fiduciaries and Plan Sponsors Need to Know

Every calendar year, participants in a §401(k) plan must limit their elective deferrals (pre-tax plus designated Roth contributions) to the amount set by Internal Revenue Code Section 402(g). Failure to adhere to that limit can expose both the employer-sponsor and participants to serious IRS consequences.

Why this matters:

If a participant exceeds the §402(g) limit, the excess must be corrected or risk plan disqualification or adverse tax treatment.
Because most employees don’t track multiple retirement plans closely, this is an area where good administration and communication with the record-keeper/provider are critical.
While the basic rule is straightforward, complications (multiple plans in the same year, catch-ups, transfers, etc.) can cause errors — and a well-versed provider will monitor for them.

What Is the 402(g) Limit?

Under IRC §402(g), the amount an individual may defer (exclude from taxable income) into a 401(k) (or other elective‐deferral arrangement) in a calendar year is capped. Elective deferrals include both pre-tax salary reduction contributions and designated Roth contributions.

For the 2025 plan year, the limit is $23,500.
Because the limit is indexed for inflation, the corresponding limit for 2026 has not yet been officially announced, but industry projections suggest a modest increase.

Key takeaway: Plan sponsors and service providers should anticipate a 2026 limit somewhat above $23,500, but must wait for the official IRS Notice before finalizing communications and payroll systems.

Are Catch-Up Contributions Included in the 402(g) Limit?

No. Contributions made under the §414(v) “catch-up” rules for participants aged 50 or older are separate and in addition to the §402(g) limit (assuming the plan permits them).

For 2025:

Standard catch-up limit (age 50 +) = $7,500.
For participants aged 60, 61, or 62 or 63 during the calendar year (a so-called “super catch-up” under SECURE 2.0 Act) the limit increases to $11,250 for 2025.

Thus, a 50-year-old eligible participant in 2025 could contribute up to $31,000 ($23,500 + $7,500). If age 60-63 and the plan permits the super catch-up, up to $34,750 ($23,500 + $11,250).

Again: those numbers will likely increase modestly for 2026 once the new limits are announced.

Which Retirement Plans Are Subject to the 402(g) Limit?

The §402(g) limit applies to elective deferrals made to:

401(k) plans
403(b) plans
SARSEPs (Salary Reduction Simplified Employee Pension)
SIMPLE-IRAs that include elective deferrals

It does not apply to elective deferrals under a §457(b) plan (which are subject to a different limit).

How Is a 402(g) Violation Corrected?

If a participant makes elective deferrals in excess of the §402(g) limit, those excess deferrals must be distributed to the participant (the “excess deferral”), along with any earnings attributable to the excess, for the year of the excess contribution.

The corrective distribution must occur by April 15 (or the tax-return due date) following that calendar year.

If timely corrected:

Pre-tax deferrals: taxable in the year of deferral
Roth deferrals: taxable in the year of distribution

If not timely corrected: the excess deferral amount is included in income in the year of deferral and again in the year of distribution (i.e., double taxation).

Plan-Sponsor and Fiduciary Consequences

Although §402(g) is an individual limit, plan sponsors must monitor compliance because:

Under IRC §401(a)(30), a qualified plan must provide that each participant’s deferrals are limited to the §402(g) amount. IRS
Failure to correct excess deferrals in a timely manner can endanger the plan’s qualified status.
Excess deferrals by Highly Compensated Employees (HCEs) must generally be included in the nondiscrimination Actual Deferral Percentage (ADP) test; excesses by non-HCEs do not.
Excess deferrals distributed after April 15 are treated as annual additions for purposes of the §415 annual additions testing in the year of the deferral.

How the Limit Applies Across Multiple Plans

If an individual participates in more than one eligible plan (for example, a 401(k) and a 403(b) in the same calendar year), the §402(g) limit must be applied in aggregate. The individual cannot defer the §402(g) limit in each plan separately.

If combined deferrals across plans exceed the limit, corrective distributions must be made from one or more of the plans. The participant must coordinate that process to ensure proper correction (preferably with plan and provider assistance).

2026 Considerations: What Plan Fiduciaries and Employers Should Watch

Here are key upcoming changes relevant for 2026 that employers and plan sponsors should prepare for now:

The official 2026 §402(g) elective-deferral limit has not yet been published, but projections suggest a modest increase.
Starting in 2026, under SECURE 2.0, participants aged 50+ whose prior calendar year wages exceed a defined threshold (currently $145,000 FICA wages, indexed) must make their catch-up contributions as Roth (after-tax) contributions rather than pre-tax.
If the plan does not offer a Roth option for elective deferrals / catch-ups, then such high-earner participants may be restricted from making catch-up contributions at all.
The “super catch-up” for ages 60-63 (150% of the regular catch-up or a base dollar minimum) became effective for 2025 and will continue — plan design must explicitly allow for it.
Operational readiness is key: systems must track prior‐year FICA wages, identify high-earner participants, enable Roth catch-up designation (or disallow catch-up). Plan documents must permit Roth elective deferrals and catch-up contributions appropriately.
Plan amendment deadlines: Many changes may need to be formally adopted in plan documents by December 31 of the plan year beginning January 1, 2026 (for calendar-year plans).
Communicate with participants: High-earners who customarily make large catch-ups need early notice of the Roth requirement and its implications (tax-treatment now vs. later).

Bottom Line

The §402(g) elective-deferral limit remains one of the simplest retirement-plan limits on its face — but it can become complex when layered with catch-up provisions, multiple plan participation, and the new SECURE 2.0 requirements. From a fiduciary perspective:

Make sure your provider/record-keeper is monitoring combined deferrals across plans and will flag excesses.
Ensure your plan document allows catch-ups and (if applicable) the “super catch-up” for ages 60-63.
Review whether your plan offers Roth elective deferrals — that will become essential for high-earners starting 2026.
Communicate to participants (especially older/high-earner employees) well in advance of 2026 changes so they can plan their deferral elections accordingly.