Contributing to a Solo 401(k) FAQs

Contributing to a Solo 401(k)

A Security Benefit Solo 401(k) offers sole proprietors the opportunity to save for retirement using many of the advantages of a traditional 401(k), including: 

  • tax-deductible contributions 
  • annual contributions that exceed 25% of compensation
  • Roth contribution availability
  • catch-up contributions for people 50 and over
  • loans or hardship withdrawals
  • rollovers from other retirement plans

Most importantly, Security Benefit's straightforward administrative requirements make these plans easy to establish and maintain for you and your clients.

Below are some frequently asked questions and you can find more on Solo 401(k) FAQs Overview, Establishing a Solo 401(k), and Rollovers and Distributions. Visit our Solo 401(k) page to learn about the Security Benefit Solo 401(k).

What compensation/income is used (by entity type) for contribution purposes for a Solo 401(k) plan?

Contributions are based on compensation from work performed in the business.

  • For corporations, this is wages as reported on W-2.
  • For Sole Proprietors, it is the net profit (IRS Form 1040, Schedule C) minus ½ of self-employment tax.
  • For Partnerships, it is the individual partner’s net profits (IRS Form 1065, Schedule K-1) minus ½ of self-employment tax. 
Are contributions tax deductible to a Solo 401(k) plan?

Yes.

Are Roth contributions tax deductible to a Solo 401(k)?

No, Roth contributions are not tax deductible in a Solo 401(k) plan. 

How much can be contributed each year to Solo 401(k) plan?

Each year, the IRS issues new contribution limits. To learn more about this year's salary deferral limits, visit our Tax Center.

What types of contributions can be made to a Solo 401(k) plan?

Pretax deferrals/contributions, Roth (after-tax) contributions, and employer contributions (matching or non-elective/profit sharing). 

How do you calculate a maximum annual contribution to a Solo 401(k) plan?

You can calculate it at our free Solo 401(k) plan maximum contribution calculator.

When do contributions need to be made to a Solo 401(k) plan?
  • S-Corporations and C-Corporations – employee contributions will need to be deducted from payroll in the year they were earned. 
  • Sole Proprietorships and Partnerships – have until the tax filing deadline (not including extensions) to process contributions.
  • All employer contributions can be made up to the tax filing deadline including extensions. 
What methods are available to remit contributions for a Solo 401(k) plan?

Contributions to Security Benefit may be made online via our employer website and can be funded via ACH.

Do contributions need to be made on a regular schedule or can a Solo 401(k) plan be funded at any time?

Contribution frequency to a Solo 401(k) plan is very flexible and can be made in installments or a lump-sum anytime within the acceptable timeframe for the contribution type.

Are catch-up contributions available to a Solo 401(k) plan?

Yes, catch-up contributions are allowed if participants are age 50 or older. 

Can contributions be made after the owner/participant in the Solo 401(k) plan is past the Required Minimum Distribution age?

Yes.

Can contributions be made to a SEP IRA and a Solo 401(k) plan in the same year?

No.

Can employee contributions be made after the end of the calendar year to a Solo 401(k) plan?

Generally, employee contributions should be deposited either before, or shortly after, the plan year-end.

Can employer contributions be made after the end of the year to a Solo 401(k) plan?

Yes, employer contributions can be made up to the tax filing deadline, including extensions.


FINANCIAL PROFESSIONAL USE ONLY — NOT FOR USE WITH CONSUMERS

Security Benefit, its affiliates and subsidiaries, and their respective employees and representatives, do not provide tax, accounting, or legal advice. Any statements contained herein concerning taxes were not intended as and should not be construed as tax advice, nor should they be used for the purpose of avoiding federal, state, or local taxes and/or tax penalties. Please seek independent tax, accounting, or legal advice. 

Services are offered through Security Distributors, a subsidiary of Security Benefit Corporation (Security Benefit).

SB-10036-84 | 2023-08-23