Multiple Salary Deferrals
A 40 year old client is employed as a W2 Employee at two unaffiliated firms. Both have 401k’s. Can he defer up to $17k salary to EACH plan ( $34k salary deferral between the two)
He also has his own 1099 income from other work he does on his own. Can he also set up a SEP and defer $50k in business income? If he set up a Solo 401k would he be able to do a third level of salary deferral?
Permalink Submitted by mk foss on Mon, 2012-10-08 19:24
There is only one 17K that he can defer with multiple employers. He can participate in more than one plan (perhaps with a zero deferral percentage). If he has no ownership in the companies offering 401(k) plans, he can do a SEP and contribute a percentage of his SE income up to 50K. If he has ownership in the other businesses, it gets complicated and he might be limited to 50K overall – including the 17K.
Establishing a solo 401(k) for his SE business, doesn’t help if he’s doing the 17K maximum elsewhere.
Permalink Submitted by Robert Taylor on Mon, 2012-10-08 21:55
The annual matrix of multiple plans that Denise Appleby contributes states (from 2011):
“If employers are unrelated or not affiliated, individual may receive up to $49,000 in the 401k plan AND receive maximum allowed contribution to the plan of the other employer.
$49,000 for 401k includes salary deferral…..plus employer contribution.”
Permalink Submitted by Alan Spross on Mon, 2012-10-08 22:02
That reference is in relation to the per employer limit of 50k (Sec 415c). With two employers, you conceivably could contribute 100k.
But the elective deferral limit of 17k is PER TAXPAYER. Therefore, with two employers you can only defer a total of 17k as an elective deferral. And since matching contributions are usually based on what the taxpayer defers, not being able to defer more than 17k in total means that you would probably get no where near 100k unless the plans allowed you to contribute after tax dollars.
Permalink Submitted by mk foss on Mon, 2012-10-08 22:02
There is only one 17k per person even though there is more than one 50k limit with multiple employers.