I recently switched my job and my new employer automatically enrolled me in 401K plan. In my previous job, I had already maxed out my $19500 limit.

I think I can reach out to my new plan administrator and ask them to refund my excess on which I will pay taxes when I file my 2021 return. But I have another idea in my mind. If I continue to contribute max all the way up to $19500 again, my employer will match 50% of that. Then towards the end of the year, I can ask my plan administrator to send my $19500 back on which I will pay taxes. Is that approach legal and acceptable?

You should talk to the 401K custodian to determine if they will take back the matching funds from the employer because your initial donation exceeded the 19.5K limit.

If that is in fact the case, then your plan should not be pursued and you should ask for an immediate refund.

ATE