Split-Year Retirement Contributions: When You Change Jobs Mid-Year

Overview

When you change employers mid-year, you can (and often should) continue saving for retirement using the new employer’s plan. “Split-year retirement contributions” means dividing your annual elective deferral across two or more employer plans in the same calendar year so your total contributions don’t exceed IRS limits and you can capture employer match where available.

This article explains how split-year contributions work, practical steps to avoid excess deferrals, examples, and common pitfalls. It also links to related FinHelp resources such as Contribution Strategies When You Change Jobs Mid-Year, Understanding Employer Match: How to Maximize Free Retirement Money, and Options for Rolling Over a Retirement Account After a Job Change.

Sources: IRS guidance on retirement contribution limits and excess deferrals (see links in Sources section). This content is educational and not individualized tax or investment advice — consult your tax advisor for your situation.

How split-year contributions work (step-by-step)

1. Know the annual elective deferral limit. The IRS sets a combined annual limit for employee elective deferrals to 401(k)/403(b)/most 457 plans and the SIMPLE plans. Limits are adjusted periodically for inflation—always check the current IRS page: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-plan-and-401k-contribution-limits (IRS).

2. Track year-to-date contributions from the old employer. Ask payroll or HR at your departing employer for a year-to-date (YTD) summary of your elective deferrals. This is the starting point for your calculations.

3. Estimate remaining allowable contributions. Subtract the YTD deferral from the annual limit to determine how much you may still defer for the remainder of the year across any subsequent employer plan(s).

4. Coordinate elections with the new employer. When you start the new job, set your deferral percentage or dollar amount so planned deferrals for the remainder of the calendar year won’t push you beyond the annual limit.

5. Monitor payroll and pay periods. The speed of payroll (biweekly, semimonthly, weekly) affects how many paychecks remain. Use that to set a safe per-paycheck deferral amount.

6. Capture employer match where it makes sense. If the new employer offers matching dollars, factor match schedules (immediate vs. vesting, percentage of pay, matching limits) into whether you should increase deferrals in the new plan. See our guide on Understanding Employer Match.

7. Correct excess deferrals promptly if they occur. If combined deferrals across plans exceed the IRS elective deferral limit, corrective steps are required—typically a distribution of excess deferrals and associated earnings by tax-filing season to avoid double taxation and penalties. See IRS guidance on excess deferrals in the Sources section.

Practical examples

Example 1 — straightforward split-year deferral

• Annual elective deferral limit: check current IRS year.
• Contributions to first employer through June: $9,000.
• Remaining allowable deferral: (limit) − $9,000.
• New employer starts in July with 12 pay periods left: set per-paycheck deferral so total remaining contributions don’t exceed the remaining allowable deferral.

Example 2 — catching an employer match

• You left Employer A after contributing $10,000.
• Employer B matches 50% on the first 6% of pay and allows immediate participation.
• If your budget allows, increase your deferral in Employer B up to the remaining allowable amount to both maximize savings and capture match. Compare projected employer match value vs. other uses of cash (emergency fund, high-interest debt).

Example 3 — excess deferral and correction

• You contributed $12,000 at Employer A and accidentally set a deferral at Employer B that pushed total deferrals to $25,000 when the IRS limit was $23,000.
• The corrective option is to request a distribution of excess deferrals (and earnings) from Employer B by the tax-filing deadline for that year. That distribution is taxable in the year contributed but avoids double taxation when the excess is later distributed again.

Always work with payroll/HR at the employer where the excess occurred; they typically process corrective distributions.

Employer match and vesting considerations

• Employer match is plan-specific. If Employer A offered a generous match that you left behind, evaluate whether the partial year vesting schedule caused you to forfeit any employer contributions. Unvested match may be forfeited when you separate employment — confirm with plan administration before relying on it.

• Some employers have a waiting period before employees are eligible to participate. If Employer B has an eligibility delay, you may not be able to defer immediately; in that case, consider other tax-advantaged accounts (IRA or Roth IRA, subject to income and contribution rules) while you wait.

• If capturing match at the new employer requires shifting deferrals toward the end of the year, ensure per-paycheck math keeps you beneath the IRS limit.

Rollover vs. split-year contributions

Changing jobs raises a second decision: roll over your old plan or leave it in place. Rollover decisions don’t change your ability to make split-year contributions, but they do impact recordkeeping and distribution options. See our related article Options for Rolling Over a Retirement Account After a Job Change.

Pros of leaving an old plan in place

• Maintain access to investments not available in the new plan.
• If the plan allows, continue managing the old account separately.

Cons

• More accounts to monitor; potential for missed notices; possibility of plan fees.

If you roll funds into the new employer’s plan or an IRA, the rollover itself doesn’t count as an elective deferral for the year.

Tax rules, excess contributions, and corrections

• Combined elective deferrals to multiple employer plans are aggregated for the IRS annual cap. Exceeding the limit creates “excess deferrals.” The employer whose plan received the excess typically distributes the excess and any earnings.

• Excess deferrals left undistributed may be taxable twice if not corrected correctly: once in the year contributed and again when withdrawn later. Follow IRS correction procedures and consult your tax advisor. See IRS guidance: https://www.irs.gov/retirement-plans/plan-participant-employee/correcting-excess-deferrals (IRS).

• IRA contribution rules are separate; if you can’t defer because of plan waiting periods, you may consider contributing to a Traditional or Roth IRA (subject to income limits for Roths). IRA contributions have separate annual limits and rules: https://www.irs.gov/retirement-plans/ira-deduction-limits (IRS).

Common mistakes to avoid

• Not getting year-to-date (YTD) payroll contribution totals before starting the new plan.
• Forgetting payroll frequency and accidentally overshooting per-paycheck deferral math.
• Ignoring employer match or vesting rules and assuming match will always follow you.
• Assuming rollovers count toward the annual elective deferral limit (they do not).

Practical checklist (before and after you change jobs)

Before you leave:

• Request a YTD deferral summary from payroll/HR.
• Confirm any employer match vesting status.

When you start the new job:

• Check eligibility and plan start date for the new retirement plan.
• Calculate remaining deferral space (annual limit − YTD contributions).
• Set a conservative per-paycheck deferral; monitor your first few paychecks.
• Confirm employer match rules and enroll to capture match if possible.

If you discover an excess deferral:

• Notify the plan administrator of the plan that accepted the excess.
• Request corrective distribution of excess + earnings before the tax filing deadline, and follow up with your tax advisor.

Frequently asked questions

Q: Can I contribute to multiple 401(k) plans in the same year?
A: Yes. You may contribute to more than one employer plan in the same year, but the combined employee elective deferrals cannot exceed the IRS annual limit. Employer contributions (matches) do not count toward your elective deferral limit though they do count toward separate combined employer+employee contribution limits for plan testing.

Q: Do rollovers count toward the annual deferral limit?
A: No. Rollovers of vested balances from a prior employer plan into a new plan or IRA are not “elective deferrals” and do not consume your annual deferral limit.

Q: What if I miss tracking and exceed the limit?
A: Contact the plan administrator that accepted the excess as soon as you learn of it. They can process corrective distributions. Consult a tax professional to handle reporting.

Professional tips from practice

• Keep an annual retirement contributions spreadsheet or snapshot of pay stubs. In my practice, clients who track YTD deferrals avoid corrective headaches and preserve employer match.

• If the new employer has an immediate matching policy, prioritize contributing enough to capture the full match even if it means small adjustments in other short-term savings.

• If you cannot participate immediately because of eligibility rules, consider contributing to an IRA in the meantime, but compare tax benefits and deductibility rules with your tax advisor.

Sources and further reading

• IRS — Retirement Plan and 401(k) Contribution Limits: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-plan-and-401k-contribution-limits
• IRS — Correcting Excess Deferrals: https://www.irs.gov/retirement-plans/plan-participant-employee/correcting-excess-deferrals
• IRS — Traditional and Roth IRAs: https://www.irs.gov/retirement-plans/ira-deduction-limits
• Consumer Financial Protection Bureau — Retirement resources: https://www.consumerfinance.gov/consumer-tools/retirement/

Professional disclaimer: This article provides general information about retirement plan coordination after a job change. It is not personalized tax or investment advice. For action specific to your situation, consult a qualified tax advisor or financial planner.