Individual 401k Contribution Limits and Deadlines

Individual 401k Contribution Limits

Individual 401k Contribution Limits

The Individual 401k contribution limits is a highly recommended option for self-employed and small business owners. One of the many features of this retirement plan is its high contribution limits compared to traditional IRA plans. The Self-directed Solo 401k retirement policy has been updated for the year 2015.

Up-to-Date Information for Individual 401k Contribution Limits Participants

Plan owners of the Single-Participant 401k are provided vital information particularly about their contribution limits and deadline. According to the IRS rules, the deadline may vary based on the type of business of the plan owner. There are different business types with varied deadlines such as sole proprietorship, C or S Corporation and single-member or multiple-member LLC. The Individual 401k contribution and deadlines may also depend on the components particularly for employee deferral or profit-sharing.

Here are the different contribution limits and deadlines for the Self-directed Solo 401k retirement plan:

For Sole Proprietorship

  • Employee Deferral – Plan owners of a sole proprietorship type of business who are below 50 years of age has a maximum contribution limit of $18,000 a year. Participants who are 50 years and older could add $6,000 to their contribution as catch up component. Deadline for a sole proprietorship contributions is by the tax filing deadline of the fiscal year.
  • Profit-Sharing – The profit-sharing component for sole proprietorship annual contribution states that participants are limited to contributing up to 25% of the income of the business and is subject to self-employment tax. Sole proprietors of Schedule C are required to base their maximum contribution on their earned income thus this lowers the overall contribution to 20 percent.

For Single Member LLC

  • Employee Deferral – As in the case of sole proprietorship, the total yearly contribution for participants younger than 50 years is $18,000 while those who are 50 years old and above are entitled of a $6,000 catch up contribution. Deadline of contribution is by the tax-filing deadline of the current year.
  • Profit-Sharing – According to Section 401 (a) (3) of the Internal Revenue Code, the employer contribution for the profit-sharing component is limited to 25% of the income of the business. Compensation is also defined as the net earnings of the individual from self-employment ventures.

For multi-member LLC and C-Corporation and S-Corporation business types, employee deferral and profit-sharing contributions are quite the same as that of the first two. Between the Individual 401k contribution limits and traditional IRA, the former maintains the highest provision.

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