SEP and 401k Max Contribution

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
alex11
Posts: 64
Joined: Wed Jul 28, 2010 5:25 pm

SEP and 401k Max Contribution

Post by alex11 » Sat Sep 23, 2017 9:06 am

Through my employer I will max out my 401k at $18,000 and they will match $3,000.

I am also a sole proprietor who contributes to an SEP-IRA.

Both of these say the total max contribution is 54k.

Am I able to put 54k in the SEP, plus the total 21k in the 401k, or is the 54k a combination of multiple retirement accounts......if so, what types of accounts are included.

Also, do non-traditional IRA contributions come into play at all?
Thanks

Spirit Rider
Posts: 7088
Joined: Fri Mar 02, 2007 2:39 pm

Re: SEP and 401k Max Contribution

Post by Spirit Rider » Sat Sep 23, 2017 8:50 pm

In 2017 there is an $18K employee deferral limit per employee across all employers.

In 2017 there is a $54K annual addition limit (employee + employer contributions) per employee per each unrelated employer.

The allowed employer contributions for either a sole proprietorship SEP IRA or one-participant 401k is $54K. The employer contribution for a sole proprietor is 20 % of net self-employment income (net business profit - 1/2 SE tax). It would require $54K / 0.20 = $270K in net self-employment income.

There are separate employer retirement plan contribution limits and individual retirement arrangement limits. The amount of their separate contributions do not affect the other limit.

SVT
Posts: 209
Joined: Mon Oct 13, 2008 8:56 am

Re: SEP and 401k Max Contribution

Post by SVT » Mon Feb 12, 2018 11:20 pm

Spirit Rider wrote:
Sat Sep 23, 2017 8:50 pm
In 2017 there is an $18K employee deferral limit per employee across all employers.

In 2017 there is a $54K annual addition limit (employee + employer contributions) per employee per each unrelated employer.

The allowed employer contributions for either a sole proprietorship SEP IRA or one-participant 401k is $54K. The employer contribution for a sole proprietor is 20 % of net self-employment income (net business profit - 1/2 SE tax). It would require $54K / 0.20 = $270K in net self-employment income.

There are separate employer retirement plan contribution limits and individual retirement arrangement limits. The amount of their separate contributions do not affect the other limit.
So the total contribution limit per year (now $55k/year) is for each separate unrelated employer. As in can't be family? I have a scenario where I'm likely going to be taking a full time job where that employer will max the $55k/year into a sep ira for me (at a 20% contribution) and I also have a PT job where that employer has a 401k with a match. The employers aren't related to each other family-wise. Does this mean even though the sep ira will be maxed at $55k/year, I can still contribute the $18.5k/year to the 401k and get the match? Thanks!

Spirit Rider
Posts: 7088
Joined: Fri Mar 02, 2007 2:39 pm

Re: SEP and 401k Max Contribution

Post by Spirit Rider » Tue Feb 13, 2018 1:33 am

I should have used the more correct term "unaffiliated" employer. It isn't just family.

There are what the IRS considers controlled groups and affiliated service groups. The former about sole or joint ownership and the latter is about ownership and services.

If your job entails providing services and you have ownership interest, the rules can be complex. If there are business relationships between the employers, you could be limited to only one annual addition limit between both of them.

This most often happens with medical professionals, but can happen in any industry.

Post Reply