Often referred to as a “side-car”‘ IRA, a deemed IRA is sometimes used by employer sponsors of traditional 401k plans (aka full-time employer 401k plans) for making contributions to a separate participant account within the full-time employer qualified plan. I.R.C. 408(q). Contributions to the deemed IRA consist solely of voluntary employee contributions NOT employer contributions such as matching and profit sharing contributions. Deemed IRA contributions cannot be made to SEP IRAs or SIMPLE IRAs. Treas. Reg. 1.408(q)-1(b). Lastly, the IRS rules do not require a 401k plan to allow for deemed IRA contributions. For this reason, solo 401k plans generally don’t allow for deemed IRA contributions because of their complexities (i.e.,g separate contribution and distribution rules) when used in conjunction with a solo 401k plan.
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