They should have a bit of the rhizome showing, I wonder if you can just dig some of the dirt off the top of the rhizome without disturbing the plant. Last year's plants do seem to have multiplied well, but I wouldn't want to divide yet. Normally plants can be divided every 3 years or so. It can very from plant to plant, some just don't multiply as fast as other. I have read on the internet all different time recommendations to divide, from 2 weeks after bloom til early fall. In my zone 6 the generally accepted time is July when they are considered dormant, but I personally like to divide after flowering through June. Not as hot then and mine do well. I have divided as late as November & even got a little bloom the following year.

Congratulations. To have great growth and no rot when they are a bit deep shows you are not overwatering!

Bearded iris most often do not bloom the first year. Some even wait until the 3rd year. It's not the deeper planting that resulted in delayed bloom. It's the nature of the rhizome. Very aggressive growers will be more likely to bloom the year after planting.

Mine sulk after dividing so I divide as little as possible. In fact I often just cut away part of the clump, let the cut area dry overnight before filling hole with dry dirt. That way the roots are barely disturbed and they are less likely to skip a year. I don't water for a couple of weeks (clay soil). Then I soak the bed overnight. I'm like Nancy. If dividing must be done, June is the best. I've even dug during bloom for friends. There is really no right or wrong here. Some people feel it gives the rhizome more time to grow roots before cold temps. arrive if done early. Others just don't feel like it and promote later digging. Molly Price's book recommends right after bloom.

2 year olds --- no dividing yet!