Confirmation of deadline for Solo 401k Employee Deferrals

Submitted by Nicole Hughes on Tue, 2024-01-02 18:41

For a solo 401k, there has been some change in deadlines for opening/funding with SECURE & SECURE 2.0. Just want to confirm that a solo owner with an existing plan can make an employee elective deferral for the prior year up to the extended filing deadline of their tax return? This is assuming not a W-2 employee, so no payroll considerations. The IRS appears to allow this as long as an “election” is made by the end of the plan year. What is recommended as far as recordkeeping to suffice for this election?

Thank you!



Submitted by Alan - IRA critic on Tue, 2024-01-02 22:05

  • The new § 401(b)(2) opportunity (for plan years that begin after December 29, 2022) to make a § 401(k) cash-or-deferred election after the last day of the year to which the election would apply can be available only for the plan’s first plan year, only if the election is made by the person who owns the entirety of an unincorporated business, and only if she is the only employee (a deemed employee) of that unincorporated business.
  • Otherwise, “a self-employed individual may not make a cash or deferred election with respect to compensation for a partnership or sole proprietorship taxable year after the last day of that year.” 26 C.F.R. § 1.401(k)-1(a)(6)(iii) https://www.ecfr.gov/current/title-26/part-1/section-1.401(k)-1#p-1.401(k)-1(a)(6)(iii).
  • The election should be made in writing by the deadline and retained by the plan owner.

Submitted by Nicole Hughes on Wed, 2024-01-03 14:23

What about the below from the IRS, Pub 560? It looks to read that there is flexibility on the elective deferral. Also see Table 1 which lists last date for contribution: “Elective deferral: Due date of employer’s return (including extensions).”Employee Contributions…. When Contributions Are Considered MadeYou generally apply your plan contributions to the year in which you make them. But you can apply them to the previous year if all the following requirements are met.

  1. You make them by the due date of your tax return for the previous year (plus extensions).
  2. The plan was established by the end of the previous year.
  3. The plan treats the contributions as though it had received them on the last day of the previous year.
  4. You do either of the following.
    1. You specify in writing to the plan administrator or trustee that the contributions apply to the previous year.
    2. You deduct the contributions on your tax return for the previous year. A partnership shows contributions for partners on Form 1065.  Elective deferral. An elective deferral is the contribution made by employees to a qualified retirement plan.·           Non-owner employees: The employee salary reduction/elective deferral contributions must be elected/made by the end of the tax year and deposited into the employee’s plan account within 7 business days (safe harbor) and no later than 15 days.·           Owner/employees: The employee deferrals must be elected by the end of the tax year and can then be made by the tax return filing deadline, including extensions.   

Submitted by David Mertz on Wed, 2024-01-03 18:05

The SECURE  and SECURE 2.0 Acts did nothing to change deadlines with respect to existing plans.  For an existing plan the election deadline remains year-end and the deadline for an owner/employee to make the deposit remains the due date of the tax return, including extensions.

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