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Contributions

Contributions to both SEP and Solo 401K in the same year

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Does the IRS allow contributions to both SEP IRA and Solo 401K in the same year?

Answer:

Yes, you may contribute into the SEP IRA and Solo 401K plan in the same year. However, you cannot exceed limitations of contributions in total.

The Solo 401K plan is more advantageous and allows you to maximize your contributions quicker since it includes both an employee deferral and a profit sharing component. The SEP IRA only has a profit sharing component. Most individuals will stop utilizing the SEP IRA and use only the Solo 401K plan. There is no reason to keep the SEP IRA open.

Contribute to Solo 401k from multiple companies

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I want to be able to contribute to my Solo 401k from multiple companies to maximize the contribution potential. How can I do this?

Contributions to your Solo 401k can only be made from the adopting business of the plan. Check your plan documents for which adopting business is listed.

If you have multiple companies, you will want to choose the company that generates the most income to be the adopting business of the plan. Or, you may want to consult with your CPA on structuring your companies with a holding company:

  • Set up a holding company for the separate companies, and
  • Make that holding company the adopting business of the Solo 401k

Holding company

  • The holding company is established to own the other companies
  • It does not do business itself

Subsidiary companies

  • The holding company owns the other companies, which are subsidiary companies
  • The subsidiary companies conduct business
  • These are pass-through entities (i.e. they don't pay taxation at their own level, the earning is passed through to the parent/holding company)
  • If the subsidiary companies are single-member LLCs, for example, then the member would be the parent/holding company. 

Your Solo 401k will need to list the holding company as the adopting business of the plan, which may require an amendment if your plan was already established with a different adopting business.

Having a current employer’s 401k plan and a Solo 401k plan

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Does my current employer’s 401k plan have any effect on my Solo 401k plan? Will my contribution limit be affected?

The employee contribution maximum is per person, not per plan.

In other words, your ability to make the maximum employee contribution to your Solo 401k is affected by the employee contribution you have made to your current employer's 401k plan.

For example, if you under the age of 50:

  • Your employee contribution maximum is $23,500 for 2025
  • If you contribute $10,000 to your current employer’s 401k plan for 2025, then
  • You can only contribute up to $13,500 to your Solo 401k plan as an employee contribution

If you have reached the employee contribution maximum in your current employer's 401k plan, you will not be able to make an additional, employee contribution to your Solo 401k. 

Note that your Solo 401k also allows you to make employer contributions. You can make an employer contribution to your Solo 401k even if you have reached the maximum employee contribution limit.

Contributions Guide