Timing Solo 401K Employer Contribution
My client has a Solo 401(K) and is asking if they can front load their employer match (25% of salary) since they know what the total contribution will be for the year. To make the numbers easy, let’s say the S Corp pays a $72,000 annual salary ($6,000 per month), and they want to make the maximum employer contribution for the year ($18,000). Does it matter at what point in the year that contribution is made? For instance, provided that the LLC does in fact end up paying the client $72,000 by year-end, would it be a problem if all $18,000 had been contributed by the end of September, even though the client had only been paid $54,000 by that point? My understanding is that the 25% limit is only checked at the end of the year.
Permalink Submitted by Dan Zaehring on Thu, 2022-07-21 16:23
Many plan documents specify the match as linked to actual payroll events. But if the forecast is so certain, why not advance the salary as well so that it can be actually matched?
Permalink Submitted by John Going on Thu, 2022-07-21 17:11
Appreciate the quick response salishseas!