My client has an I401K. I know what the limits are for EE and ER contributions. He is under 50 and also works for a company that has a 401K. Is the total he can contribute for both plans combined still $ 19,500 for employee and $ 57,000 total?
Suppose my client has the means to max everything out. Am I correct in saying that he can put in $ 19,500 in his 401K. His employer can put in up to $ 37,500 bringing the total to $ 57000. In addition he can put in $ 57,000 in his SoloK as an employer contribution?
The employer contribution to the other company’s plan is limited to 25% of compensation (or whatever lower percentage the plan specifies) or to matching contributions, depending on the terms of that plan. The employer contribution to the individual 401(k) is limited to 20% of net earnings. Net earnings are net profit minus the deductible portion of self-employment taxes. With high enough compensation and net profit, it is possible that the annual addition to each plan separately could be $57,000.
Permalink Submitted by David Mertz on Tue, 2020-12-29 16:45
The $19,500 limit is a per-individual limit on elective deferrals and Roth contributions and applies to both plans combined. However, the $57,000 limit is a per-plan limit, not a per-individual limit, and applies to each plan separately.