Self Employed 401k Formal Election Question
I understand that a person with a self employed 401k must make a formal election by year end for the employee contribution of their contribution, but then can make the contribution in the following tax year. My question is, after making the formal election can they change the amount? For example if a person is over age 50 and they select 26,000 as a contribution with their election form, can they then decide to do, for example, $20k in the following year? Or are they committed to the amount on the form.
Thanks
Permalink Submitted by William Tuttle on Fri, 2021-12-17 19:41
An employee deferral election can be changed at anytime. However, employee deferrals made in the following year up to the tax filing deadline including extensions, must be based on the deferral election in effect on 12/31 of the tax year.
I.e. you can’t change your mind for employee deferrals for that tax year after 12/31. You can only execute the employee deferral election subject to compliance rules. E.g. You have insufficient self-employed earned income, you have employee deferrals to other plans, etc…