Resulting from the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), catch up contributions can be made by both IRA and solo 401k participants who are age 50 or older. For example, solo 401k participants who have attained age 50 before the end of 2019 qualify for the $6,000 catch up(IRC Sec. 414(v)) solo 401k employee contribution, which can be made to either the Roth solo 401k or pretax solo 401k bucket bu not the voluntary after-tax solo 401k bucket.
Here are some items to know surrounding solo 401k catch-up contributions:
- Not all solo 401k plans allow for catch up contributions.
- Catch up contributions are made after the regular employee contributions ($19,000 for 2019) have been exhausted.
- A participant is considered to be age 50 any time during the calendar year in which he or she turns 50.
- Catch up contributions fall under the employee contribution source no the profit sharing contribution source.
- If you stop being self-employed during the year, you can still make catch up contributions for the year provided you had the applicable net self-employment income during the year to justify the contribution.
- Catch up contributions may not be made to other self-employed retirement plans such as SEP IRAs and Defined Benefit Plans.
- Roth solo 401k contributions qualify for the catch up contribution.
- Solo 401k participants may borrow from the solo 401k catch up contribution amounts.