Can an Employer Contribute MORE than an Employee to a SOLO 401k?

Watch: How employer profit sharing contributions to a Solo 401k can exceed employee contributions — and how the Mega Backdoor Roth fits in.

Yes — an employer (profit sharing) contribution can absolutely be greater than an employee contribution in a Solo 401k plan. The two contribution types are governed by separate rules, and there is no IRS requirement that they be equal, or that you make both at all. Whether you’re self-employed as an S-corp, sole proprietorship, partnership, or 1099 contractor, understanding how these two “buckets” work is the key to maximizing what you can put into your Solo 401k — and to using strategies like the Mega Backdoor Roth to their fullest.

What Is a Solo 401k, and Who’s Eligible?

A Solo 401k — also called a Solo K, an Individual 401k, or a Self-Directed Solo 401k depending on the provider — is an owner-only 401k plan. To qualify, your business cannot employ any full-time, non-owner, common-law W-2 employees age 21 or older who work 1,000 hours or more per year. A spouse who works in the business can participate in the same plan without needing to be an owner.

Info Highlight: A Solo 401k can be sponsored by an S-corp, C-corp, partnership, sole proprietorship, or a Schedule F farm business. 1099 independent contractors who receive Form 1099-NEC also qualify.

Example: A business owner asks: “My spouse and I are both on payroll and contributing to our Solo 401k. If I add my kids to payroll, does the plan still work?” It can — as long as the kids are under age 21. Anyone under 21 can be excluded from the plan even if they’re W-2 employees working 1,000+ hours. Once a child turns 21, they’d need to be a 3%-or-more owner in the business to keep the plan intact; otherwise the plan would need to be closed.

Employee vs. Employer Contributions: Two Separate Buckets

With an owner-only Solo 401k, you wear two hats: employer and employee. Unlike a SEP IRA, which only allows employer profit sharing contributions, a Solo 401k allows both an employee contribution and an employer profit sharing contribution — and the employee amount does not have to equal the employer amount. You can make only an employer contribution, only an employee contribution, only a voluntary after-tax contribution, or any combination of the three, as long as you stay within the overall limit.

2026 Solo 401k Contribution Limits

Contribution Category	2026 Limit
Overall limit (under age 50)	$72,000
Normal catch-up (ages 50–59, and 64+)	+$8,000 (total $80,000)
Super catch-up (ages 60–63)	+$11,250 (total $83,250)
Maximum employee contribution	$24,500

Important: You can only use the normal catch-up or the super catch-up amount — not both. And every contribution type (employee, employer, catch-up, or voluntary after-tax) requires enough earned income from self-employment activity to justify it. No earned income means no contributions.

Because contribution limits apply per participant, spouses who are both self-employed in the same business — each with their own W-2 wages, for example under an LLC taxed as an S-corp — can each separately contribute up to the overall limit based on their own respective earned income. Spouses cannot combine or “piggyback” off each other’s self-employment income.

How Much Can the Employer Contribute? (By Entity Type)

Unlike the employee contribution, which is a dollar-for-dollar calculation, the employer profit sharing contribution is always a percentage calculation, and the percentage depends on how your self-employed business is taxed.

Entity Type	Employer Contribution Formula
S-corp / LLC taxed as S-corp	25% of gross W-2 wages (Box 1, plus applicable Box 12a amounts)
Sole proprietorship	20% of (Schedule C, Line 31 minus ½ of self-employment tax)
Partnership	20% of (Schedule K-1, Line 14 Code A minus ½ of self-employment tax)

Example: Say your LLC is taxed as an S-corp and you have $100,000 in gross W-2 wages. Your maximum employer profit sharing contribution is 25% of $100,000 = $25,000. You can then also make the maximum employee contribution of $24,500. That’s $49,500 toward the $72,000 overall 2026 limit — leaving $22,500 in room. That remaining $22,500 can be made as a voluntary after-tax Solo 401k contribution and converted to a Roth Solo 401k or Roth IRA using the Mega Backdoor Roth strategy.

Important: The employer profit sharing contribution can never equal 100% of compensation — it’s always a percentage calculation, capped at 25% (S-corp) or 20% (sole proprietorship/partnership), and it requires sufficient reported earned income to support it.

The Mega Backdoor Roth Solo 401k Strategy

My Solo 401k Financial was the first provider in the industry to offer the Mega Backdoor Roth strategy for Solo 401k plans, allowing voluntary after-tax contributions as part of the plan design. Because voluntary after-tax contributions are a dollar-for-dollar calculation rather than a percentage calculation, it generally takes less self-employment earned income to reach the $72,000 overall limit through the Mega Backdoor Roth than through employer contributions alone. You can even skip employee and employer contributions entirely and make the full $72,000 solely as a voluntary after-tax contribution, then convert it to a Roth Solo 401k or Roth IRA — as long as you don’t exceed the overall limit.

2026 Roth Catch-Up Rule for Higher Earners

Starting in 2026, under SECURE 2.0, if your business is taxed as an S-corp, C-corp, or LLC taxed as an S-corp and your prior-year (2025) Social Security wages exceeded $150,000, any catch-up or super catch-up contribution must be made as a Roth Solo 401k contribution rather than pre-tax. Catch-up and super catch-up amounts are made on the employee side and are not part of the voluntary after-tax Mega Backdoor Roth calculation.

Can the Employer Contribution Be Made as Roth?

Yes — under SECURE 2.0, employer profit sharing contributions can be made directly as Roth Solo 401k contributions. However, doing so means treating the contribution as a taxable in-plan conversion on your personal tax return, even though the business still gets the deduction. This may make sense for an LLC taxed as an S-corp looking to save on payroll tax, but that’s typically the only advantage.

Info Highlight: If your real goal is maximizing Roth savings, the Mega Backdoor Roth voluntary after-tax strategy is generally more efficient than an employer Roth contribution, since it’s a dollar-for-dollar calculation rather than a percentage of compensation.

Contributing to a Day-Job 401k and a Solo 401k

Many My Solo 401k Financial clients contribute to a full-time employer’s 401k while also running a self-employed business on the side. Whether contributions must be combined (“aggregated”) across both plans depends on the contribution type.

Contribution Type	Subject to Aggregation Across Plans?
Employee (elective deferral) contribution	Yes — combined limit across all 401k plans
Employer profit sharing contribution	No — calculated separately based on self-employment earned income
Voluntary after-tax (Mega Backdoor Roth) contribution	No — calculated separately based on self-employment earned income

Example: You max out your day-job 401k with a large employer, then also run a self-employed business on the side with $100,000 in W-2 wages under an LLC taxed as an S-corp. You can still contribute 25% of that $100,000 ($25,000) as an employer profit sharing contribution to your Solo 401k — and, separately, you may still be able to make a full $72,000 voluntary after-tax contribution to your Solo 401k and convert it via the Mega Backdoor Roth, even though your day-job 401k is already maxed out.

The $1,500 Auto-Contribution Tax Credit

Under the SECURE Act, eligible small businesses that adopt a retirement plan with an auto-contribution feature can claim a $500 per year tax credit for three consecutive years — a total of $1,500 — filed using Form 8881 with the business tax return. My Solo 401k Financial was the first provider in the solo 401k industry to build this auto-contribution credit into its plan, and regularly helps clients restate existing Solo 401k plans from other institutions to take advantage of it.

Common Mistakes to Avoid

Mistake	Why It’s Wrong
Counting S-corp distributions as earned income	Only W-2 wages/compensation count — distributions don’t qualify for Solo 401k contribution calculations.
Calling the employer contribution a “match”	Matching only applies to traditional full-time employer 401k plans. A Solo 401k employer contribution is a profit sharing contribution — there’s no matching involved.
Assuming all contribution types are aggregated with a day job	Only employee elective deferrals are aggregated. Employer and voluntary after-tax contributions are calculated separately.
Mixing contribution sources in one account	Pre-tax, Roth, and voluntary after-tax funds must be tracked in separate holding accounts under the plan.

One Plan, Separate Holding Accounts

A Solo 401k is a defined contribution plan, meaning each participant has separate holding accounts — pre-tax, Roth, and voluntary after-tax — rather than one pooled account. For a one-participant plan, that means three holding accounts under a single plan sponsored by the business. If a spouse also participates, it’s still one plan, but each spouse maintains their own set of three holding accounts to separately track their respective source of funds.

Why This Matters

Because contribution limits and calculations are based on each participant’s own earned income, keeping funds properly separated by source and by participant is essential for staying compliant and accurately tracking what’s been contributed under each rule.

Ready to Maximize Your Solo 401k Contributions?
Whether you want to maximize employer profit sharing contributions, employee contributions, or the Mega Backdoor Roth strategy, our team can help you structure the right Solo 401k plan for your business.Next Steps:
Get Started Today — or watch more videos and read more posts from My Solo 401k Financial to learn how to grow your retirement account tax-efficiently.

Remember: This information is provided for educational purposes only. Always consult with qualified tax, legal, and investment professionals before making investment decisions with your retirement funds.