Understanding the rules for retirement plans takes work. This is especially true when you contribute to a 401(k) at your day job and a solo 401(k) for your business during the same year.
It might be surprising to learn, but contributing to a solo 401(k) plan and another employer’s 401(k) plan can make determining your maximum annual contributions for each plan challenging.
This post shows how contributions to these two plans can impact your overall funding level. Let’s dive in!
Background
We work with people who contribute to various retirement plans. Therefore, having clients who contribute to multiple plans in a year is not new for us.
Many of our clients are physicians who work at a clinic or hospital during the day and take on side locum tenens or independent contracting work. In these situations, it is common for them to fully contribute to their 401(k) plan at the medical facility while still looking to fund their 401(k) or Mega Backdoor Roth.
When people contribute to multiple defined contribution plans, a significant challenge arises: combining or aggregating contribution amounts. Although the employee deferral and annual contribution limits are typically consistent across these plans, aggregating them can be complex.
Employee deferral and annual contribution limits
401(k) plans are a type of defined contribution plan. There are two different contribution limits noted below:
- Employee deferral limits (covered under IRC 402(g))
- Annual contribution limits (covered under IRC 415(c))
Here is a summary of funding limits:
| 401(k) Contribution Limit for 2026 | Amount |
|---|---|
| Deferral for under age 50 | $24,500 |
| Deferral for age 50-59 & 64+ | $32,500 |
| Deferral for age 60-63 | $35,750 |
| Maximum for under age 50 | $72,000 |
| Maximum for age 50+ | $80,000 |
| Maximum for age 60-63 | $83,250 |
Contribution limits with multiple 401(k) plans
Let’s first review the general rule when it comes to combining multiple plans and then we can dive into the specifics.
General rule
There are two general rules when it comes to combining 401(k) plans.
Employee deferral general rule
When it comes to the employee deferral limit, you are NOT allowed to combine the limit with different 401(k) plans. This limit is per person and per year. As a result, the limit applies cumulatively to both plans.
For example, let’s assume you max out the deferral limit in your 401(k) day job. You are not allowed to make additional employee deferrals in your solo 401(k) plan. However, if you contributed $15,000 to your 401(k) plan at your employer, you could fund an add’l $8,500 to your solo 401(k) plan deferral.
Annual additions general rule
But there is a second “general rule” that we must discuss. Generally, you do not need to combine the annual contribution limits if you contribute to multiple plans under different companies (that you do not control).
The annual addition limit applies to each separate “unaffiliated employer.” In other words, each control group has its own addition limit.
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For example, if you contributed the maximum to one plan, you could generally contribute up to maximum to another plan, even if you cannot make an employee deferral.
This rule offers significant benefits for small business owners. They can receive safe harbor contributions and profit-sharing contributions from their primary employer while still maximizing their annual contribution limit for a solo 401(k) plan.
You can benefit from employer contributions without limitations if you have multiple day jobs. It’s a great opportunity!
Multiple 401(k) Combo Example
A 48-year-old anesthesiologist is employed at a medical center. He contributed $15,000 to the medical center 401(k) the center made a $2,000 employer contribution.
The anesthesiologist also has side income from working part-time at a local hospital. This side business income is taxed as a sole proprietor. The net profit (as reported on Schedule C of his 1040 tax return) was $340,000. He would like to max out the employee deferral to his solo 401(k) and also max out the contribution to his solo 401(k) profit-sharing portion.
Because both 401(k) employee deferral contributions are aggregated, he can make the following contributions:
| Type | Day Job 401(k) | Solo 401(k) | Total |
|---|---|---|---|
| Employee Deferral | $15,000 | $8,500 | $23,500 |
| Employer Contribution | $2,000 | $61,500 | $63,500 |
| Total | $17,000 | $70,000 | $87,000 |
Bottom Line
Understanding how 401(k) contributions at your day job impact solo 401(k) limits is crucial for planning. The employee contribution limit applies across all 401(k) plans combined. Employer contributions from your day job do not reduce your Solo 401(k) employer limit.
Is a Cash Balance or Defined Benefit Plan Right For You?
With a Solo 401(k), you can contribute as both employee and employer. However, your total contributions, including those from your day job, cannot exceed the annual limit.
Careful tracking of contributions is essential to avoid exceeding IRS limits. Exceeding these limits may lead to penalties and tax issues. If unsure, consult a financial advisor to optimize contributions while maximizing tax advantages across both plans.
