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You wrote, The limit specified applies as well to the "individual" - so if you change employers mid-year, in total you still can't exceed the limit for the year.

That's not precisely true. You can always exceed the limit, but there are consequences. However I've discovered that there can be situations where exceeding the limit is better than the penalties.

Let's discuss the penalty for exceeding the employee deferral limit. If not timely withdrawn, that penalty is "double taxation" on contributions. That is the official penalty is that you are supposed to amend your return if necessary and pay taxes on the excess in the year you made the excess contribution.

This might be worth doing on purpose if the taxes are less than the matching you receive from your employers. (The employer will usually take back the match and any associated earnings if you make a corrective distribution.) For instance my own employer pays 50 cents on the dollar for every elective employee deferral dollar. If you left another employer for whom you had not hit their cap and took a job here, you would be wise to max-out the employee limit again with my employer because the match will more than pay for the extra taxes.

Also I've noticed that the wording of the penalty rule requires you to include the excess contributions in your taxes. That wording does not seem to account for Roth 401(k) contributions. That is to say Roth 401(k) contributions were already included in your taxable income, so the wording would imply that you only need to include it once. This would seem to suggest that if you make only Roth 401(k) contributions in the year of an excess contribution, you can effectively ignore those excess contributions entirely since there is no penalty and no difference in tax treatment.

In addition Section § 1.402(g)-1 - Limitation on exclusion for elective deferrals and Section 1.404(v)-1(c) Catch-up contribution limit are individual limits and the penalties only appear to apply to contributions made pursuant to these sections. After tax contributions are considered part of Section 1.415(c)-1. Limitations for defined contribution plans, which is the overall plan limit. This limit appears to be per-plan and I'm not aware of any employee specific penalties for violating it. What's more the after-tax contributions have already been included in your income taxes for the year, so the existing penalty wording wouldn't seem to address it in any case.

So it would seem that if you work for more than one employer during the year it might be possible to contribution far in excess of both the employee deferral and plan limits... And if you plan it right and are very lucky you can completely avoid any extra tax liability.

- Joel
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