How much money can be put into the Retirement Plan?
How much money can be put into the Retirement Plan? For any questions you may have about how much money you should or can put into your retirement plan, your best resources are first and foremost your tax or financial advisors. From a standpoint of global rules, the IRS does set annually Cost-of-Living-Adjustment—“COLA”—limits that apply specifically to the amounts that employees, employers, or the combination of both can put into a given employee’s account. These annual limits are available to you anytime via the IRS website at http://www.irs.gov/pub/irs-tege/cola_table.pdf. For 2015, the contribution limit for the combined total of pre-tax and Roth deferral for an employee is $18,000. If an employee is age 50 or older, he or she can put an additional catch-up contribution of $6,000 in employee deferral into his/her account. This 401(k) limit applies to all 401(k) accounts an employee contributes to in a given year.
Matching funds from the employer (if applicable) are limited then to 25% of your salary, or 20% of your net self-employment income if you are self-employed. Matching contributions are considered tax-deferred amounts in your plan. The total of your elective salary deferral plus any employer contributions is limited to $53,000 for the 2015 year.
What are the limits above called, when looking at the IRS 2015 COLA limits list?
$18,000 – 402(g)(1) elective deferral limit
$6,000 – 414(v)(2)(B)(i) catch up contributions $53,000 – 415(c)(1)(A) limit
Published on Mar 6, 2013
Designed specifically for the self-employed, Solo 401(k)s are a great fit for freelancers, sole-proprietors and consultants. ShareBuilder 401k President Stuart Robertson explains why.
For more tips on 401(k) plans, please visit “The Straight Scoop on 401(k)s” playlist at www.youtube.com/sharebuilder401k.
ShareBuilder 401k is a leading provider of retirement plans designed specifically for small and mid-size businesses. By automatically keeping fees low, more of our customers’ money stays invested to help build a bigger nest egg. ShareBuilder 401k brings together investment expertise, leading online and offline technologies with a low-cost, index-based approach to investing using all ETFs and a money market fund. Equally important, ShareBuilder 401k plans are fully supported by the ShareBuilder Investment Committee, licensed 401(k) Consultants and Customer Success Managers to help serve employers and participants at the highest level.
This is intended only as general information for your convenience. You should consult your tax adviser regarding specific tax strategies.
Advisory services are provided by Capital One Advisors, LLC, an SEC registered investment advisor and a subsidiary of Capital One Financial Corporation. ShareBuilder 401k is the marketing name for Capital One Advisors, LLC.
Securities and services are: Not FDIC insured · Not bank guaranteed · May lose value · Not a deposit · Not insured by any Federal Government Agency
Individual 401k Plans for Owner-Only Businesses
The ShareBuilder 401k Individual 401k provides owner-only businesses with the opportunity to shelter a significantly higher portion of the profits for retirement than previously allowed through conventional retirement plans. Individual 401k enables the owner(s) to contribute up to 25% of compensation as a tax-deductible employer contribution in addition to any pretax contributions.
Ideal for accountants, attorneys, dentists, entrepreneurs, physicians, real estate brokers, consultants, contractors and other self-employed individuals
Shelter your profits for retirement while saving money with an affordable 401(k) plan
Focus on running your business with our convenient, low maintenance plan
Full-service, online access to check balances and manage account
Annual statement mailed to the employee’s home
Access to tax-free loans
Allows for account consolidation and rollovers
Toll-free access to customer service support
Frequently Asked Questions
Q. Who can use an Individual 401(k)?
A. An Individual 401(k) is designed specifically for businesses that either do not employ any common law employees or that employ only common-law employees who may be disregarded for purposes of federal qualified plan coverage requirements. Generally, any business or enterprise that employs only the owner(s) and/or spouse(s) of the owner(s) can utilize the Individual 401(k). These businesses include:
Q. What if I have ownership in more than one business?
A. You may have to include all businesses under one business retirement plan (depending on whether the business constitutes a “controlled group,” as defined under section 1563 of the Internal Revenue Code).
Q. What are the contribution limits?
A. Plan contributions cannot exceed the lesser of $53,000 or 100% of compensation. Employee deferrals are limited to $18,000 (employees age 50 and over can contribute an additional $6,000 ).¹ The employer contribution limit is 25% of compensation.¹
Q. Are rollover contributions allowed?
A. Yes, rollovers and transfers are allowed from most other tax-deferred retirement plans, including Keoghs, defined benefit plans, deductible and conduit IRAs, SEPs, 401(k)s, profit sharing and money purchase plans, SIMPLE IRAs after two years of SIMPLE participation and 403(b) and governmental 457 plans.
Q. What is the deadline for funding an Individual 401(k)?
A. The deadline for funding the profit sharing portion is the business’s tax return due date, including extensions. The deadline for depositing employee salary deferrals depends on whether or not the business is incorporated.
Q. What is the deadline for an employee salary deferral election?
A. Owners of an unincorporated business (i.e., sole proprietor or partner) must generally make a written employee salary deferral election (including amount) by no later than the last day of their tax year. If a business is incorporated, it must generally make a written employee salary deferral election (including amount) before the compensation is currently available or paid.
Q. Can personal loans be taken against the Individual 401(k)?
A. Yes, incorporated and unincorporated business owners are eligible to take personal loans from qualified plans.
Q. What types of employees can generally be excluded from the Individual 401(k)?
A. Generally, under federal law you are permitted to exclude the following types of employees from coverage under a 401(k) plan, such as the Individual 401(k):
Employees under age 21
Employees with less than one year of service
Employees who work less than 1,000 hours per year
Certain union employees
Certain nonresident alien employees
¹ 2016 limits. Limits are indexed annually.
This information does not constitute tax advice. Please consult your tax adviser for specific tax information.