Last Updated 07/07/2022
The 401(k) regulations allow for contributions to multiple 401(k) plans. This is especially advantageous for those who have a full-time job and participate in that employer’s 401(k), and those who also have a self-employed business and participate in that self-employed business solo 401(k).
A solo 401(k) is made up of employee and employer contributions.
The employee contribution is aggregated between all 401(k) plans. The employee contribution limit for 2022 is $20,500 plus $6,500 for those age 50 or older is
However the profit-sharing contribution (employer contribution) is not subject to this aggregation rule.
As a result, if you have a solo 401(k) plan for your self-employed business and have already contributed the $20,500 plus the $6,500 catch up amount to the full-time employer 401k plan, you can still contribute the profit-sharing portion to the solo 401(k) plan even though you may have already contributed the maximum of $67,500 (includes the catch up amount and employer profit sharing contribution) to the daytime job 401k plan for 2022.
For example, let’s assume your self-employed business is an S corporation and that you want to make a contribution to the solo 401(k). Let’s further assume that you have $100,000 of W-2 income from your S corporation.
Example & The Voluntary After-Tax Solo 401k Exception
Therefore, you would be able to contribute a profit-sharing contribution (employer) amount of $25,000 into the solo 401(k) which was calculated by multiplying 100,000 × 25%. The end result, means that you would have contributed a total of $92,500 ($67,500 plus $25,000) in aggregate to both your daytime job employer 401(k) and your self-employed business solo 401(k) plan. However, if you also want to make voluntary after-tax contributions , you could contribute the difference up to the $61,000 ceiling to your voluntary after-tax solo 401k account since this contribution type is not subject to the aggregation rules described above. VISIT HERE to learn more about this exception.