401(k) Contribution After Employment Separation
Is it possible to contribute to your former 401(k) plan post-termination? I will be self-employed going forward. Subject to IRS maximums of course.
Is it possible to contribute to your former 401(k) plan post-termination? I will be self-employed going forward. Subject to IRS maximums of course.
Permalink Submitted by Alan - IRA critic on Wed, 2020-05-20 21:52
Basically no, since elective deferrals and employee contributions must come from your compensation and you are no longer being paid. However, there may be a stray 401k plan that accepts rollovers after separation. For example, the govt TSP plan will accept IRA rollovers after separation if you maintain a balance in the plan. If you will be self employed, you may wish to open a solo 401k plan.
Permalink Submitted by Francis Giordano on Fri, 2020-05-22 15:55
Understand. However, when you say “contributions must come from your compensation”, suppose I made 100k in Q1 but only contributed say 5k to my plan. Can I then go-ahead a write a check to my 401(k) or does it have to be a payroll deduction? Conversely, if I open a solo 401(k) can I use the Q1 comp that was previously earned under the old plan to fund the new account?
Permalink Submitted by Alan - IRA critic on Fri, 2020-05-22 16:55
For former plan, any contributions needed to be made prior to termination from your compensation. You cannot write a check for the amount the plan would otherwise have accepted. And compensation from the former employer cannot be treated as self employment income.
Permalink Submitted by Francis Giordano on Fri, 2020-05-22 20:05
I appreciate the advice very much. Enjoy the holiday weekend and stay safe.