Menu Close

Can I Have a Solo 401(k) Plan and Contribute to an Employer 401(k) Plan?

Yes – the IRS and the ERISA rules do not include any exclusive plan rules. Therefore, once can be a participant of more than one 401(k) Plan. Thus, one can have a full-time job that offers a 401(k) Plan and participate in the plan as well as have a Solo 401(k) Plan. They key is that the individual must have some self-employment income in order to be eligible to adopt a Solo 401(k) Plan. For example, if the individual has a full time job at a large accounting firm but also does some accounting work on the side as a consulting (1099 income), that individual can participate in the accounting firm’s 401(k) Plan as well as adopt a Solo 401(k) Plan for his consulting business.

Unfortunately, being a participant of more than one 401(k) Plan does not allow an individual to defer more than the maximum limitation each year. For 2013, individuals under the age of 50 can defer $51,000 annually and those over the age of 591/2 can defer $56,500.

Under the 2013 new Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,500. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $51,000, an increase of $1,000 from 2012.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $23,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $56,500, an increase of $1,000 from 2012.

The above rules apply whether the individual is a participant of one or more plans. Hence, if the individual already make his or her maximum employee deferral contribution, he or should would not be able to make additional employee deferrals to the Solo 401(k) Plan. However, the individual would be able to make a profit sharing contribution to the Solo 401(k) Plan up to the maximum contribution limitation, including employee deferrals.

To learn more about the Solo 401(k) Plan contribution rules, please contact a tax expert at 800-472-0646.

Share the knowledge
Posted in Solo 401(k)