The limit on contributions to an individual's 401k was $18,000 in 2017, and if a person accidentally pays too much into the account, it is crucial to correct the error to avoid paying extra taxes, according to Nerdwallet. This limit only applies to the pre-tax wages that an employee contributes to their plan and won't count any employer matches.
To fix the mistake, contact the plan administrator and let them know that you have made an 'excess deferral,' which will let them know the current situation. From here, they are required to return the money back to you in a 'corrective distribution' that accounts for any additional earnings that this money might have made. It can take time for administrators to process this request and issue a new W-2 so reach out to them early to avoid filing taxes after the deadline.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.
