The excess is taxable in the year of the excess contribution (but not subject to the premature distribution penalty).

If the excess amount is not removed, the taxpayer cannot include it in the cost of the contract even though it is included in their income. Therefore, the taxpayer will be taxed twice on the excess deferral left in the plan; once when contributed and again when the taxpayer receives it as a distribution (unless the excess deferral was a designated Roth contribution).,