Reply To: solo 401K questions

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Thanks for the prompt response Kaye. Please help me understand the difference between your definition of the 2021 deferral limit and that described on the following IRS web page. It appears to indicate the $58K limit for 2021 does *not* include the catch-up contribution:

“Contribution limits in a one-participant 401(k) plan
The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both:
• Elective deferrals up to 100% of compensation (“earned income” in
the case of a self-employed individual) up to the annual contribution limit:
o $20,500 in 2022 ($19,500 in 2020 and 2021), or $27,000 in 2022
($26,000 in 2020 and 2021) if age 50 or over; plus
• Employer nonelective contributions up to:
o 25% of compensation as defined by the plan, or
o for self-employed individuals, see discussion below . . .
Total contributions to a participant’s account, not counting catch-up contributions for those age 50 and over, cannot exceed $61,000 for 2022 ($57,000 for 2020; $58,000 for 2021).“