Edited by 
Edited by 
Reviewed by 
Your 401(k) contributions should automatically stop at the annual limit. For 2025, the IRS has set the contribution cap at $23,500, with an additional $7,500 catch-up contribution allowed for those over age 50. In most cases, payroll systems are designed to automatically stop 401(k) contributions once you reach the annual limit. However, not all employer systems identify the cap immediately, which can result in accidental over-contributions. If this occurs, the employer must correct the excess to prevent potential tax penalties.
A financial advisor can help you review how prepared you are for retirement based on your 401(k) and other retirement account contributions.
Do Contributions Stop at Employer 401(k) Accounts?
When you hit your contribution limit at your employer’s account, contributions should automatically stop. The payroll system is usually programmed to halt contributions once you’ve reached the annual cap, ensuring compliance with federal regulations. This system safeguards employees from exceeding the IRS limits and facing potential penalties.
However, it’s important to remember that not all payroll systems are foolproof. That is why monitoring your contributions throughout the year is wise.
While your contributions may stop upon hitting the limit, your employer’s contributions may continue if you have a matching plan. Employer contributions are not counted against your individual contribution limit, but rather against the overall contribution limit, which includes employee and employer contributions combined. For 2025, this total limit is $70,000, or $77,500 for those eligible for catch-up contributions.
Do Contributions Automatically Stop at Solo 401(k) Accounts?
Solo 401(k) plans are particularly appealing to self-employed individuals and small business owners, allowing them to contribute both as an employer and an employee.
Unlike employer-sponsored 401(k) plans where contributions automatically stop once limits are reached, solo 401(k) plans typically require more active management by the account holder. There are no automatic stop mechanisms. This means it’s essential to closely monitor both employee and employer contributions throughout the year to avoid exceeding the limits.
In 2025, the contribution limit for solo 401(k) plans is the same as it is for traditional 401(k) plans, with individuals under 50 allowed to contribute up to $23,500. Those aged 50 and above can make catch-up contributions of $7,500, bringing their total employee contribution limit to $30,500. As the employer, you can contribute up to 25% of your net self-employment income, with total contributions not exceeding $70,000, or $77,500 with catch-up contributions.
What to Do If You Exceed the 401(k) Contribution Limit
Exceeding the contribution limit for your 401(k) or any retirement account can lead to tax complications. But there are ways to rectify the situation. The IRS allows individuals to correct excess contributions to avoid penalties, provided the issue is addressed promptly.
If you exceed the 401(k) contribution limit, you must notify your plan administrator and request a return of the excess contribution along with any earnings generated from it, which will also be refunded to you.
The deadline for correcting this mistake is April 15 of the following year. This allows you time to resolve the issue without incurring a penalty. You will then need to get a corrected W2 Form from your employer.
What if you fail to correct the excess by the tax-filing deadline? In that case, the excess amount could be subject to a 6% excise tax for each year the excess remains in the account.
Finally, if you have more than one employer and contribute to two separate 401(k) plans, either simultaneously or due to changing jobs, make sure to track your contributions across both plans. The IRS contribution limit applies to your combined total contributions across all plans.
So if your total contributions exceed the limit, you’ll need to correct the excess by requesting a refund of the overage from one of the plans.
All About 401(k) Contribution Limits
The IRS has clear limits on how much individuals can contribute to their 401(k) plans. These 401(k) contribution limits are designed to encourage retirement savings while preventing excessive tax-advantaged contributions.
For 2025, the IRS has established a maximum employee contribution limit of $23,500 for individuals under the age of 50. This means that throughout the year, you can allocate up to this amount from your salary into your 401(k) plan. This allows you to enjoy the benefits of tax-deferred growth and potentially employer-matching contributions.
If you’re 50 or older, you’re eligible for “catch-up” contributions, which allow you to contribute an additional $7,500, bringing the total to $31,000. This catch-up provision is especially beneficial for those looking to bolster their retirement savings as they approach retirement age.
Contribution limits apply to both employee and employer contributions. In 2025, the total combined contribution cap for 401(k) plans is $70,000, or $77,500 for those eligible for catch-up contributions. This limit accounts for your contributions, any employer matching and additional contributions from your employer. Since many employers match a percentage of employee contributions, it’s a good idea to contribute enough to take full advantage of the employer match.
For highly compensated employees (HCEs), specific rules apply to prevent discrimination in favor of higher earners. The IRS defines HCEs based on income or ownership criteria, and companies must pass non-discrimination tests to ensure 401(k) benefits are equitable. This may affect how much highly compensated employees can contribute, particularly in plans where average contributions vary significantly between employee groups.
Bottom Line
Contributions typically stop automatically once the annual limit set by the IRS is reached, which can help prevent over-contributions and associated penalties. However, the accuracy of this automatic halt depends on your employer’s payroll system. So you should also keep track of your contributions regularly. Those with solo 401(k)s will need to keep track themselves.
Retirement Planning Tips
- A financial advisor can assist by helping you track your 401(k) contributions, maximize employer matches and correct excess contributions across multiple plans to avoid penalties. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- IIf you’re an entrepreneur, it’s only natural to put all your net earnings back into your business. But you should also put at least some of it into your retirement savings. You can start small with a traditional IRA or a Roth IRA. To help you make the right decision, we published studies on the best IRAs and the best Roth IRAs.
Photo credit: ©iStock.com/RgStudio, ©iStock.com/FG Trade, ©iStock.com/FG Trade