Contribute to a PSP 401k and a solo 401k at the same time

QUESTION: I really enjoy reading your very informative blogs surrounding the solo 401k rules! Do you know if you can have a PSP and a solo 401k?

ANSWER: I’m assuming in my answer the following:

  1. You are self-employed (e.g., independent contractor) and are also employed full-time by a company such as Apple or Home Depot, for example.
  2. You are currently contributing to your full-time employer’s Profit Sharing Plan (PSP) and would also like to setup a solo 401k for your part-time, independent contractor business, which is an unrelated business from your day-time, full-time job.

Based on the above assumptions, yes you can contribute to a PSP and a solo 401k plan.  Following example from the website sheds light on this.

Click here to view the IRS web page containing the following example:

Example 1: Greg, 46, is employed by an employer with a 401(k) plan and he also works as an independent contractor for an unrelated business. Greg sets up a solo 401(k) plan for his independent contracting business. Greg contributes the maximum amount to his employer’s 401(k) plan for 2012, $17,000. Greg would also like to contribute the maximum amount to his solo 401(k) plan. He is not able to make further elective deferrals to his solo 401(k) plan because he has already contributed his personal maximum, $17,000. He has enough earned income from his business to contribute the overall maximum for the year, $50,000. Greg can make a nonelective contribution of $50,000 to his solo 401(k) plan. This limit is not reduced by the elective deferrals under his employer’s plan because the limit on annual additions applies to each plan separately.


Linda in Oregon

Additional Information

Contribute to Multiple Employer Plans

Solo 401k Contribution Limits

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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