A solo 401k plan is the preferred retirement savings vehicle for owner-only self-employed businesses. If you are opening a solo 401k for the first time and your self-employed business is taxed as a sole proprietorship, it will be best to open/adopt the solo 401k plan by December 31, 2024 so that you can make both employee an employer contributions in 2025 by October 15, 2025 for 2024.
While the SECURE 2.0 extended the solo 401k set up deadline to April 15, 2025 for a sole proprietorship, an LLC taxed as a sole proprietorship as well as a 1099-NEC, it is always best to open the solo 401k by 12/31/2024 so that you don’t forget to take advantage of the favorable solo 401k contribution limits. Otherwise, you will be forced to make the employee contributions by April 15, 2025 even if you file a business tax return extension.
Therefore, by signing the solo 401k plan establishment documents including the Adoption Agreement by 12/31/2024, you will be able to both open and fund the solo 401k holding accounts (i.e., the bank or brokerage accounts) by the business tax return including extension. Click here to get started.
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There are now 2 (two rules)–one for making employee contributions and the other for making employer contributions.
The Solo 401k Employee Contribution Deadline Rule (Roth and Pretax)
The solo 401k plan now has to be opened by the taxpayers individual tax return (Form 1040) due date, so April 15 2025 if you want to make the solo 401k plan effective for 2024. However, this deadline is for making employee pretax/Roth solo 401k and/or employee Roth solo 401k contributions. This means 2024 solo 401k employee contributions would need to be made by April 15, 2025. As a result, if you want to make the solo 401k effective for 2024, it will be best to open the solo 401k plan prior to April 15, 2025 so that you will have enough time to make the employee contributions by April 15, 2025.
Example 1: Ben is a sole proprietor with a law practice. In February 2025, Ben decides to open a solo 401k retroactively for 2024. Provided the solo 401k plan is opened by April 15, 2025(his 2024 tax filing, without extensions), Ben will be able to fund the plan with both 2024 employee contributions and employer contributions. Note that he can also wait to make the 2024 solo 401k employer contributions by October 15, 2025
The Solo 401k Employer Contribution Deadline Rule (Pretax and Roth)
However, if the solo 401k plan is opened after April 15, 2025 but by October 15, 2025 it can be made effective for 2024 so that you can make employer pretax solo 401k and/or employer Roth solo 401k contributions. However, you would not be able to make employee pretax solo 401k and/or employee Roth solo 401k contributions for 2024 as those had to be made by April 15, 2025.
Example 2: Same example as above, Ben is a sole proprietor and in June of 2025 he decides to open a solo 401k retroactively for 2024. As long as the solo 401k plan is opened by October 15, 2025(his 2024 tax filing deadline with extension), Ben will be able to fund the plan with only 2024 employer contributions. However, he won’t be able to make employee contributions.
Voluntary After Tax Solo 401k Contributions–The Mega Backdoor Roth Solo 401k
Lastly, you will be able to make voluntary after-tax solo 401k contributions for 2024 as part of the mega backdoor Roth solo 401k if you wait to open the solo 401k by October 15, 2025 because you filed a personal tax return extension since your business is a sole proprietorship or an LLC taxed as a sole proprietorship.
