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EmployEE contributinos required in Solo401k?

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  • EmployEE contributinos required in Solo401k?

    This is my first year where all of my income is 1099. I have a solo401k. Do I have to make employEE contributions, since the deadline is 12/31/19, or can I simply make employER contributions only, since the deadline is the tax-filing deadline?

  • #2
    You don’t have to make employee contributions.

    you should have a deferral election form that you complete as employee that dictates the amount.

    the employee deferral deadline is not 12/31 if you’re a sole prop.

    It basically is 12/31 if you’re an S Corp because the deferral has to be withheld from payroll.

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    • #3
      Originally posted by jacoavlu View Post
      You don’t have to make employee contributions.

      you should have a deferral election form that you complete as employee that dictates the amount.

      the employee deferral deadline is not 12/31 if you’re a sole prop.

      It basically is 12/31 if you’re an S Corp because the deferral has to be withheld from payroll.
      Thanks. Yes, I'm a sole proprietor, and I have my Solo401k through E-trade. The contributions default to employer contributions, but if I contact them they'll change to employee contributions. I'm not aware of any deferral elective form that they provide.

      I just wasn't sure if there was any con to only doing employer contributions, other than the fact that they can't be reversed if I over-contribute (or at least it's very difficult).

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      • #4
        If your income is enough to reach the $56k limit with only employer contributions then it really doesn’t matter.

        you can find template deferral election forms through google. You must complete one every year and keep it on file, since you are the plan administrator.

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        • #5
          If you're contributing to a Roth Solo 401(k) option, then the Roth contributions must be employee contributions. Employer contributions aren't allowed to be Roth. (That would be nice to sock away $56k in Roth contributions!)

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          • #6
            Originally posted by jacoavlu View Post
            If your income is enough to reach the $56k limit with only employer contributions then it really doesn’t matter.

            you can find template deferral election forms through google. You must complete one every year and keep it on file, since you are the plan administrator.
            Does the deferral election form apply to employer contributions as well, or only employee contributions?

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            • #7
              Originally posted by southerndoc View Post
              If you're contributing to a Roth Solo 401(k) option, then the Roth contributions must be employee contributions. Employer contributions aren't allowed to be Roth. (That would be nice to sock away $56k in Roth contributions!)
              Gotcha. I'm not doing Roth contributions, but thanks!

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              • #8
                Originally posted by pistolpete View Post

                Does the deferral election form apply to employer contributions as well, or only employee contributions?
                Only employee. Employer contributions are not “deferral”

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                • #9
                  Originally posted by southerndoc View Post
                  If you're contributing to a Roth Solo 401(k) option, then the Roth contributions must be employee contributions. Employer contributions aren't allowed to be Roth. (That would be nice to sock away $56k in Roth contributions!)
                  Good point

                  you can of course get $56k in a workaround with a mega backdoor Roth strategy

                  or even easier at E*TRADE where they uniquely allow in plan Roth rollover of pretax amounts, so one doesn’t even need after tax contributions to get this done

                  so OP could make $56k in employer contributions and then in plan Roth rollover the amount, to get $56k in Roth

                  of course the in plan rollover is subject to tax at the marginal rate

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                  • #10
                    jacoavlu Is that difficult to set up at E*Trade? What is involved with it?

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                    • #11
                      Originally posted by southerndoc View Post
                      jacoavlu Is that difficult to set up at E*Trade? What is involved with it?
                      No
                      just the typical solo 401k application

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