Advanced Underwriting Consultants

Question of the Day – July 16

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  My client wants to contribute the maximum to his Solo 401(K) plan.  How much is that?

Answer:  This is from the IRS website:

One-Participant 401(k) Plans


Contribution limits in a one-participant 401(k) plan

The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both:

  • Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit:
    • 2012: $17,000 or $22,500 if age 50 or over
    • 2013: $17,500 or $23,000 if age 50 or over; and
  • Employer nonelective contributions up to
    • 25% of compensation as defined by the plan, or
    • for self-employed individuals, see discussion below

Total contributions to a participant’s account, not counting catch-up contributions, cannot exceed $50,000 for 2012 and $51,000 for 2013.

The employer non-elective contributions are limited to 20% of net self-employment income for self-employed individuals.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.