The 2021 Solo 401k Plan Establishment/Adoption Deadline

By: George Blower

August 26, 2021

2021 Solo 401k Establishment Deadline

For those self-employed individuals looking to save on taxes for the 2021 tax year, a self-directed solo 401k may be just what the doctor ordered. However, time may be running out in order to preserve the right to make both employee and employer contributions. Reason being, unlike a SEP IRA which only accepts employer contributions (aka profit sharing contributions), a solo 401k allows for both employee and employer contributions. However, in order to allow for more time to make employee contributions to the solo 401k the solo 401k must be established/adopted by by December 31, 2021. A solo 401k will meet the establishment deadline for 2021 for making employee contributions as long as the solo 401k plan documents are executed/signed by 12/31/2021.

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The December 31, 2021 Solo 401k Setup/Adoption Deadline

2021 Solo 401k Setup Deadline

Unlike SEP IRAS, Solo 401k Plans Have 2 (Two) Setup/Establishment Deadlines

The SECUR Act which was enacted in 2019 changed the solo 401k setup deadline but it caused confusion because the new rules pertaining to the deadline to establish a solo 401k plan only changed for making profit sharing (aka employer contributions) not employee contributions (aka salary deferral contributions).  As a result, if a solo 401k is adopted by December 31, 2021, the self-employed business owner will be able to make both employee and employer contributions for 2021 in 2022 by his or her business tax return due date including business tax return extensions. However, if the solo 401k is not adopted until January 1, 2022 or after but by the self-employed business tax return including the business tax return extension deadline, the business owner can at minimum make employer profit sharing contributions. 

SOLO 401(K)