What Is the 402(g) Limit on Retirement Contributions?

The Internal Revenue Code sets limits on how much individuals can contribute to retirement accounts annually. The 402(g) limit applies to an employee’s own contributions, known as elective deferrals, capping the amount of compensation an employee can set aside on a tax-advantaged basis. The Internal Revenue Service (IRS) periodically adjusts this limit for cost-of-living increases.

Understanding the Core Limit

The 402(g) limit is the maximum amount an employee can contribute from their salary to certain workplace retirement plans each year. For 2025, the IRS has set this limit at $23,500. This cap applies to the total of all elective deferrals an individual makes across all their plans, even if they work for multiple employers, as it is a per-person limit, not a per-plan or per-employer limit.

Contributions Subject to the Limit

The 402(g) limit applies to employee elective deferrals, which are contributions taken from a paycheck for a retirement account. This includes both traditional pre-tax contributions that reduce taxable income and Roth contributions made with after-tax dollars. Contributions made by an employer, such as matching funds or profit-sharing, do not count toward the 402(g) limit. After-tax contributions not designated as Roth are also excluded from this cap.

Applicable Retirement Plans

This annual deferral limit applies to a specific set of employer-sponsored plans, including:

• 401(k) plans, common in the private sector.
• 403(b) plans, offered to employees of public schools and certain tax-exempt organizations.
• Salary Reduction Simplified Employee Pension (SARSEP) plans.
• The elective deferral portion of SIMPLE IRA plans.

Contributions to 457(b) plans fall under a similar deferral limit.

Special Contribution Rules

Certain rules allow for contributions beyond the standard 402(g) limit or impose different overall caps. These provisions help older workers accelerate their savings or regulate the total amount contributed to a retirement account from all sources. These special rules operate alongside the primary 402(g) limit but serve distinct purposes.

The catch-up contribution rule allows individuals age 50 or over to contribute above the standard 402(g) limit. For 2025, the standard catch-up amount is $7,500, allowing an eligible individual to contribute up to $31,000. A provision effective in 2025 also allows those aged 60, 61, 62, or 63 to make a larger catch-up contribution of $11,250.

A change taking effect in 2026 impacts catch-up contributions for high-income earners. Employees with FICA wages over $145,000 in the prior year must make any catch-up contributions on a Roth (after-tax) basis. If an employer’s plan does not permit Roth catch-up contributions, these employees cannot make any catch-up contributions.

The Section 415(c) limit governs the total annual additions to a participant’s account, which for 2025 is $70,000. This cap includes the employee’s elective deferrals, employer matching, and employer profit-sharing contributions. Catch-up contributions do not count against this limit. For example, if an employee under 50 contributes $23,500 and their employer adds $50,000, the total of $73,500 would exceed the $70,000 limit, requiring a correction.

Identifying and Correcting Excess Deferrals

Exceeding the 402(g) limit creates an “excess deferral,” which often happens when an individual changes jobs and contributes to multiple 401(k) plans without tracking the total. Because the limit is individual, the employee is responsible for monitoring their contributions across all plans. Failure to correct an excess deferral results in a tax penalty.

The consequence of an uncorrected excess deferral is double taxation. The excess amount is taxed in the year it was contributed because it exceeds the tax-deductible limit. It is taxed again when distributed from the retirement account, making timely correction important.

To correct an excess deferral, the employee must calculate the excess amount and notify their plan administrator. They must request a corrective distribution before the tax filing deadline, April 15 of the following year. The plan will then distribute the excess deferral, plus any investment earnings it generated, back to the employee.

For a corrective distribution, the principal amount of the excess deferral is taxable income in the year the contribution was made. The earnings generated by the excess funds are taxable in the year they are distributed. The plan administrator reports these on Form 1099-R with specific codes to show it is a corrective distribution, which avoids the 10% early withdrawal penalty.