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In general, I was wondering who is responsible for keeping track of when a normal, employer-sponsored 401k account has hit its pre-tax contribution limits for a year. I assume that, in the end, the individual is responsible for their tax-related activities, but I also know that there is typically a lot of legislation in place that prevents institutions from allowing individuals to do inappropriate tax maneuvers. It can only happen at one of three levels:

  1. The 401K Provider - the 401k provider has all the information necessary to determine when an individual has put too many pre-tax dollars into an account and could stop them
  2. The Employer - since HR/Payroll is responsible for deducting pre-tax contributions, they could easily stop the deductions when the yearly limit has been reached
  3. The Individual - most of a 401k contribution is automated, but it could still be on the individual to reconcile everything at tax-time (though this could get very complicated, because tax-free growth occurred during the year); overall this seems like the sloppiest approach

So, at which level is this sort of limitation performed; or does it vary by provider and/or state?

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Does your 401k provider stop you when you hit your max?

Here is a bogleheads discussion on the topic. Apparently different employers do different things.

https://www.bogleheads.org/forum/viewtopic.php?t=133214

Some employers stop your contributions, some put the money in after-tax 401(k) contributions, and some stop their own matching contributions.

The Individual

Only if you've had multiple jobs. The second won't know how much you contributed to the first.

though this could get very complicated, because tax-free growth occurred during the year

You seem to be implying that the capital gains which happen during the year affect the $19K you can contribute during the year. That's not true.

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    Gains don't change the limit, but if the plan mistakenly accepts excess contributions (technically deferrals) they must remove and pay you (taxably) the excess plus the portion of earnings on the account (interest, dividends, or gains) allocable to that principal. (The same is true for IRA, where you are more responsible for avoiding excess contributions.) – dave_thompson_085 Sep 22 at 7:25
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It happens. I maxed out my 401(k) contributions for 28 years and there was never an issue when the deposit hit the annual limit. Between the employer and administrator, it happens.

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