Individual 401(k)-2022 Employee Contribution Deadline

Submitted by Brandon Blanchard on Tue, 2022-11-22 16:13

I have a client that is a realtor and reports income on Schedule C. She is interested in opening and funding an Individual 401(k) for the 2022 tax year. I know her Individual 401(k) needs to be opened by year-end in order to allow for a 2022 employee contribution (up to $27,000). Does the $27,000 employee contribution actually have to be made and in the account by 12/31/2022? Or can she simply file a form with the record keeper before year-end stating that she will be making a $27,000 2022 employee contribution but actually hold off on depositing that 2022 employee contribution into the account until Q1 2023?



Submitted by David Mertz on Tue, 2022-11-22 19:57

  • The election to make the elective deferral must be made by 12/31/2022 (and cannot be made until the individual 401(k) has been established), but the employee contribution only needs to be made as soon as is practical after determining the amount the client is eligible to contribute.  That could be early in 2023.  If she already knows that her net earnings will be sufficient to make a full $27,000 elective deferral, other than availability of funds there is no reason to delay the deposit much beyond the date of the election.
  • The election needs to be made with the plan administrator which would typically be herself.

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