Rich Carreiro wrote:
>> So does that then open up interesting possibilities for the
>> self-employed? For example, maybe I have one business that's
>> insurance planning and another that's investment advice. For one I
>> treat myself as an employee and contribute to a solo-401(k), for the
>> other I open a SEP. Does this work?
>
> It works, but I believe there's an integrated limit across all
> your business ventures. The total "employer" contribution to
> all your solo 401(k)s/SEPs can't be more than around $46,000
> (I don't remember the exact 2008 number).
It doesn't work as well as truly separate employers would work - there's
no advantage to creating separate plans. There's a common
control/owner****p test where multiple "employers" are considered a
single one for contribution purposes when they exceed
owner****p-percentage levels. Certainly a sole pro who wears two or three
hats fails that test.
The better scenario is a day-job 401k with moonlighting on the side, so
they're truly separate employers...the latter could have its own SEP-IRA
or solo-k. The "separate employer" principle says each has its own
contribution limit, though the $15,500 "salary deferral" limit applies
across all plans in aggregate.
This gets complicated depending on what types of plans are in the mix,
the IRS pub on the topic addresses it. Nolo press used to have a great
book too but it's out of print -- I emailed them about that, they said
they didn't sell enough of them. Strange to me...so many sole-pros out
there, but a guide about setting up a retirement plan (a complicated
topic, addressed very well) didn't sell. While they're able to sell, you
know "dog law" and titles like that!
-Tad
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