Solo401k – 2022 Maximum Contribution Limit Question

Submitted by John Lugauer on Sat, 2023-04-01 14:30

I have a single person solo401K plan and she had Net Profit in 2022 of $77,356 and Net Earnings of $71,891 after the deduction for self-employment tax. The accountants Keogh/SEP/SIMPLE Worksheet goes through the calculation and Step 22 indicates the maximum deductible contribution is $52,696.

If the participant’s plan document allows for maximum deferred contributions in 1) employee contributions 2) employer matching contributions and 3) Profit sharing contributions. Then is this $52,696 really the maximum deductible contribution?

With catch-up contributions what would the maximum breakdown be for the three categories? The IRS number seems to indicate with catch-up that the overall limit for 2022 is $67,500.

1. Employee contribution = ? This seems straightforward at $27,000.
2. Employer matching = ?
3. Profit sharing = ?

I’ve spoken with the plan administrator, but that was not very beneficial. Any help would be greatly appreciated!
Thank you,
John



Submitted by David Mertz on Sat, 2023-04-01 19:53

The accountant’s number is wrong.  For 2022, with $71,891 of net earnings the maximum elective deferral with catch-up is $27,000 and the maximum employer contribution (profit sharing) is $14,378 for a total of $41,378.  A maximum total contribution of $52,696 would require net earnings of $128,482 (net profit of $138,249).

Submitted by John Lugauer on Sat, 2023-04-01 21:18

Thank you for the input.  The profit sharing could be $14,378 and the total of $41,378.  How about the additional maximum employer 401k matching contribution?

Submitted by William Tuttle on Sat, 2023-04-01 22:01

  • Maximum employer contributions are 25% of compensation.
  • For a self-employed individual this is calculated as 20% of net earnings from self-employment (self-employed earned income) = business profit – 1/2 SE tax.
  • The maximum total employer contributions and maximum non-elective (profit sharing) contributions are exactly the same.
  • This is why employer matching is never done in one-participant 401k plans. Employer matching is more complex and does not result in any greater contribution space.

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