Impact of 403b Day-Time Job Contributions to Solo 401k Contributions including voluntary After-Tax Contributions

If you participate in both a 403b plan through your day-time employer where you are not an owner of the employer that sponsors the 403b plan, and also participate in a solo 401k  sponsored by your self-employed business,  your annual contributions to both plans may be impacted as described below.

Employee Deferral Limit

The employee deferral limit –that is, the $19,500 for 2021 is aggregated across your day time employer 403b and your self-employed business solo 401k plan.
Therefore, you cannot make employee deferral limit contributions at the pretax and Roth solo 401k level if you have already maxed out the employee deferral limit to your day job employer 403b plan.

Voluntary After-Tax Solo 401k Contributions NOT Impacted

HOWEVER, the above employee deferral rules do not apply to voluntary solo 401k after-tax contributions (aka the mega backdoor Roth solo 401k) because 401k voluntary after-tax contributions fall under the “overall 415 limit”. The overall limit essentially allows the self-employed business owner to maximize voluntary after-tax solo 401k contributions as long as he or she has enough net self-employment income to justify the overall limit contribution of $57,000 for 2020  which increased to $58,000 for 2021.

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 >>

Post a Comment

Your email is never published nor shared. Required fields are marked *

You may use these HTML tags and attributes <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>