Elective deferral limit (402(g) limit)

What the 402(g) limit is

The elective deferral limit caps an employee’s own salary deferrals for a calendar year. It covers pre-tax and Roth deferrals combined. For 2026 the limit is $24,500, up from $23,500 in 2025. Employees aged 50 or older can add catch-up contributions on top.

For 2027 it rises to $25,500. (IRS Notice 2026-66)

The limit belongs to the person, not the plan. Someone who works for two unrelated employers in one year shares a single $24,500 across both 401(k) plans. Employer contributions do not count toward it. They count toward the separate annual additions limit ($72,000 in 2026).

Why it matters to employers

Your plan cannot accept more than the limit from any employee, so payroll must stop deferrals once someone reaches it. Your plan and payroll only see the deferrals made through you, so a mid-year hire who contributed at a previous job has to track the combined total and tell you if they are close.

Example

A new hire joins on July 1, 2026, having already deferred $15,000 at a former employer. They can defer only $9,500 more in 2026. If your payroll lets them defer $12,000, the extra $2,500 is an excess deferral.

Common mistakes

• Missing the fix deadline. Excess deferrals and their earnings must be paid back to the employee by April 15 of the following year. After that, the excess is taxed in the year it was deferred and again when it is finally distributed.

• Treating Roth deferrals as separate. They share the same limit.

• Resetting year-to-date totals after a payroll or provider change, which lets employees go over.

• Confusing this limit with the 415(c) limit, which includes employer money.