Earnings in a traditional 401(k) account are always taxable upon distribution. Because the excess elective deferral not corrected by the deadline does not add to after-tax basis in the 401(k) despite being taxable on the tax return for the year in which the excess deferral is made, the excess is also taxable upon distribution. If the excess deferral is not corrected by the deadline, distributions are regular distributions and are taxable the same as any other regular distribution.
