Announcement

Collapse
No announcement yet.

Two 401Ks Question

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Two 401Ks Question

    Hi Everyone- I had a question about having two 401Ks. I have my regular W2 401K (which I'm maxing at $18,000). Part of this was Roth (I switched my contributions to traditional about half-way through the year). I also have opened a Solo traditional 401K and a Solo Roth 401K for my 1090 locums income. I opened both types of accounts to roll on old traditional 401K and an old ROTH 401K from an old employer into these new accounts. For the Solo 401Ks I understand that I can only contribute the employer portion, since I have already used my employee portion through my W2 401K. And I understand I cannot go over the $54,000 total for all 401Ks for the 2017 year.

    I just wanted to double check that I can contribute to a Roth Solo 401K even if I've contributed to my Roth W2 401K, so I can validate the opening of the Solo Roth 401K to allow my rollover. I have just contributed $1,000 into this Solo Roth 2014K. I can then use the traditional Solo 401K to reach that maximum $54,000 (or 20% of my 1090 income)?

    In general, are there separate maximum amounts for Roth contributions vs Traditional 401K contributions beyond the total maximum limit? Could I go over $18,000 for all combined Roth accounts - W2 and Solo Roth 401Ks - same for Traditional 401Ks as long as under/at the $54,000 total limit?

    Thank you for any thoughts! My CPA is still trying to understand that I can have more than one 401K.

  • #2
    There is one employee deferral limit for all qualified plans. This limit applies to to traditional deferrals and Roth deferrals combined. This limit is $18K for 2017 and $18.5K for 2018. If you have made the maximum employee deferral to your W-2 401K, you cannot make any further deferrals to a one-participant 401k, Roth or traditional.

    If you have made a Roth 401k deferral to the one-participant 401k. This is an excess employee deferral. You will need to contact the custodian to return it and any associated earnings. The earnings will be taxable in the year of distribution.

    There is one annual addition limit for each unaffiliated employer. This limit is $54K for 2017 and $55K for 2018. This limit applies to the sum of employee and employer contributions at that employer. You have a separate $54K limit for the one-participant 401k.

    There is no requirement to make any contribution to either a traditional 401k account or designated Roth account before making a rollover contribution. All that is necessary is that you are eligible for the one-participant 401k in the first place. The rollover contributions are unlimited and do not interfere with any other limits.

    However, you will have to file Form 5500-EZ by 7/31 following any year the balance is >= $250K.

    Comment


    • #3
      Thank you spiritrider!

      The contribution to the Roth solo (one-participant) 401K that I made I am counting as part of the employer contribution (up to 20% of my 1090 income), so it should not be an excess deferral as it is not an employee deferral. I am planning on contributing much more as part of my employer deferral to the traditional solo 401K for the rest of the employer 20% of 1090 income to the $54 limit.

      Does this sound right to everyone?

      Comment


      • #4
        Employee deferrals and employer contributions are distinct contributions.

        Employer contributions are never deferrals and are always pre-tax.

        Comment


        • #5


          Employer contributions are never deferrals and are always pre-tax.
          Click to expand...


          Just to clarify into layman's language, employers can never contribute to an employee's Roth space in a 401k account. Any 401k contributions must always come from the employee. That is why you are over-contributed. However, the contribution itself is tax-deferred (which is why I thought the word "deferral" might be confusing).

          The custodian likely had no idea or would have (hopefully) disallowed.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

          Comment


          • #6
            Ok very helpful spiritrider and Johanna!

            Just to confirm. If I haven't actually finished out maxing my regular W2 401K and I stop the contributions at $17,000 I will still be alright having contributed $1,000 to my Solo Roth 401K? This will complete my $18,000 employee contribution without going over?

            And then I can contribute 20% of my total 1090 income to the traditional (pretax) Solo-401K to a maximum of $54,000 as the employer contribution?

            Thank you again for the help! It's my first year with 1090 income.

            Comment


            • #7


              Just to confirm. If I haven’t actually finished out maxing my regular W2 401K and I stop the contributions at $17,000 I will still be alright having contributed $1,000 to my Solo Roth 401K? This will complete my $18,000 employee contribution without going over?
              Click to expand...


              Yes, you can do this. If you've contributed more to the Roth as an employer (in error), you have the option of notifying your W2 employer that you've over-contributed to your 401k at work and asking for the overcontribution to be refunded (this must be done before 4/17/17 and I wouldn't wait until the last week). Then you can allocate the equivalent amount to the employee contribution for your Roth solo-k.


              And then I can contribute 20% of my total 1090 income to the traditional (pretax) Solo-401K to a maximum of $54,000 as the employer contribution?
              Click to expand...


              You can contribute 20% of your net profit which is your 1099 income less business expenses.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

              Comment


              • #8
                Perfect! Thank you again so much for the help!!

                Comment

                Working...
                X