Adopting Solo 401(k) for 2020
If a Schedule C filer adopts a Solo 401(k) now (post-12/31/20), can he/she make a salary deferral contribution for 2020? I know that the Secure Act extended adoption of plans until the tax filing deadline. I assume he/she can make a profit sharing contribution for 2020 but there may be a problem making salary deferral contributions since he/she could not have filed a salary deferral election by 12/31/20 given that the plan had not been adopted by then.
Permalink Submitted by William Tuttle on Sat, 2021-04-03 01:54
A one-participant 401k plan adopted by a self-employed individual for 2020 after 12/31/20. Can only be used to make employer contributions and if so supported employee after-tax contributions. Both the adoption and the contribution deadlines are your tax filing deadline including extensions.
The reason is as you noted. The SECURE ACT only amended the tax code 401k adoption deadline. The separate tax code requirement that the employee deferral election must be completed by 12/31 was not changed.