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Multiple 401K rules for independent contractor

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  • Multiple 401K rules for independent contractor

    After reading post on Multiple 401(k) rules i still have a few questions,

    Lets say i work as an independent contractor(1099) for 2 different hospitals and being able to max 56k limits from each 1099.
    Can i still open 2 separate 401k and max them out?

    Second scenario:
    I have worked as 1099 for one hospital using locum/third party company for couple years. For this year I did it for few months only and was able to max out employee and part of employer contribution. Now for the rest of the year i have singed new 1099 contract directly with the same hospital (skipping locum company) . Is it considered not related employer?
    Should i open separate 401K? is it possible.
    Or should contribute remaining employer portion to the 401k i already have.

    Third scenario:
    Lets say i can have two separate 401k( and being able to max both of them) while working for 2 not related hospitals.
    Do I have to have physically separate 401k accounts or can i have one physical account and separate contributions on the paper only?

    I was told by CPA that since i am my own employer I would only have one employer contribution- only one 401k. I am aware of only one 19500 employee limit.
    My impression until i got confused by above, was that i can have separate 401k for each 1099 agreement as long as i work with separate entities.
    So lets say i work as 1099 for one locum company in different hospital i can have only one 401k.
    But if i work as a 1099 locum for two separate companies in 2 separate hospitals i should be able to have 2 separate 401k, right?

    Please correct me if i am wrong.
    It seems to be simple stuff but at he same time i have a filling that even professionals are getting confused.

  • #2
    for 1099 income, you are the employer, so it all falls under the same umbrella. Doesn’t matter where the income comes from if it’s all being paid to you

    Single solo 401k. Single $19,500 in 2020 employee deferral limit. Single $57,000 in 2020 annual addition limit.


    • #3
      Your CPA is correct.
      As an independent contractor you are not an employee of the hospitals, and your retirement plan is not linked to any hospital.
      If you were a W2 employee you could use the hospital retirement plan in addition to your own plan for work you did on the side.
      But since you are purely 1099 you are the employer and employee for only your one-participant plan regardless of where you earn your money or how many contractual agreements you have.

      I rarely forgo a chance to bash a misinformed CPA but if you're still confused you might want to refer back to him/her.


      • #4
        The only time you really can contribute more than $57,000 is if you're employed somewhere, make the max contribution of $19,500 into that employer's 401(k) and then have 1099 income enough that you can make a $57,000 employer profit sharing contribution. I work with some people fortunate enough to have this situation. Even if you only have $19,500 in income with the employer, you can contribute it all and still max out your employer profit sharing contribution of your Solo 401(k) or SEP.


        • #5
          Thank you for quick clarification. That make sense now. BTW I have an excellent CPA but it never hurts to double check