Contribution election simply means you formally document that you 1) plan to make elective deferrals into your plan and 2) how much you plan to contribute. 

The easiest way to make a contribution election is to input your "planned" and "done" contributions into your Solo 401k Contribution tracker.

When you complete your contribution election by December 31st, you have until you file taxes for your business to make the deposit (Including extensions).

Example:

The Contribution Tracker will automatically calculate your default 3% contribution amount based on your net self-employment income. Update your contribution election (more or less than 3%) to match your actual contribution amount.

From IRS Publication 560:

No, the IRS requires you to make your contribution election by December 31st for that year.

You can change the contribution election any time before 12/31 if you are a W2 employee in your business and up until tax day if you are a sole proprietor, single-member LLC, or LLC taxed as a partnership, but you cannot make the initial election after the 12/31 deadline.

You must make your initial contribution election by 12/31. This is especially important if your Solo 401k has the Eligible Automatic Contribution Arrangement (EACA) amendment.

Yes, maybe. It depends on your business structure.

If you're a W2 wage employee in your business (e.g. because your business is an S-corp, C-Corp, or LLC taxed as an S-Corp), the IRS requires you to make your contribution election by December 31st for that year. This is the way to "lock in" your Solo 401k contribution amount.

If you are a sole proprietor, single-member LLC, or an LLC taxed as a partnership, you can change your contribution election by tax time but it is still recommended you make your initial contribution election as a best faith effort by December 31st.

According to IRS regulations, if you are a W2 employee of your company (e.g an LLC taxed as an S-Corp, or corporation), you should have a good idea of your total annual wages before December 31st. Therefore, you should be able to elect your Solo 401k contribution by the December 31st deadline.

Suppose you're a single-member LLC or sole proprietorship. In that case, your compensation may be locked in after the 1st of the year, but you will have received any net compensation by 12/31. Therefore, you should still make your initial contribution election by the 12/31 deadline, but you can change or update your contribution election after the 1st of the New Year once you've confirmed your net compensation from the previous calendar year.

Per IRS regulations, you cannot make your deferral election after the end of the plan year on December 31st. Your employee salary deferral contribution is 3% of your total compensation.

If you did not change your contribution election by December 31st, you must contribute (at least) 3% as an employee salary deferral contribution to your Solo 401k plan.

Example:

If you aren't a Solo 401k Core member, download the "DIY" contribution election form and share with your CPA. Complete the form by December 31st of each year.

Keep a copy for your records and share a copy with your CPA. You don't need to send a copy of the form to Nabers.

Yes, you can adjust your EACA contribution election to a percentage or amount higher or lower than the default 3%.

The flexibility to change your EACA election ensures you can adapt your contributions to match your net self-employment earnings in a given period.

Any changes must be documented and will remain in effect until you update your election again.

For further details on retirement plan contribution elections, visit the IRS Retirement Plan FAQs.

Yes, you may set your EACA contribution amount to $0 if you do not intend to make contributions.

However, this election must be formally documented, which happens automatically in our Contribution Tracker.

Without documentation of changing your EACA election to $0, your plan default contribution of 3% will apply. Setting your EACA contribution election to $0 will not disqualify you from claiming the EACA tax credit.

Additional information about contribution defaults is in the IRS Guidance on Automatic Enrollment Plans.

The IRS limits employee contributions across all retirement plans.

For 2024, the total employee deferral limit is $23,000 (or $30,500 if you are 50+). For 2025, the total employee deferral limit is $23,500 (or $31,000 if you are age 50+ and $34,750 if you are age 60-63).

If you’ve already contributed the maximum at another workplace plan, you cannot make further employee deferrals to your Solo 401k under the EACA.

However, adopting the amendment may still allow you to claim the tax credit since you can change your EACA contribution to $0 and still claim the full tax credit ($500 per year for 3 years).

Refer to the IRS Employee Contribution Limits for further details.

It depends! If you are a sole proprietor, single-member LLC, or multi-member LLC taxed as a partnership, you can change your contribution election anytime until you file taxes for your small business.

However, if your business is an LLC taxed as an S-corp, a sub-chapter S-corporation, or a C-Corp — in other words, if you receive a W2 from your business, then you must decide and stick to your contribution election by December 31st since your payroll for the year is already decided and completed by 12/31.

If you change your contribution election (amount or percentage), your new election will override your previous choice and remain effective until it is updated again.

You have the option to elect either a percentage of your net earnings or a specific dollar amount. This flexibility allows you to align your contributions with your financial strategy.

Yes, you can opt out of the default 3% contribution amount and make contributions in any other percentage or amount you prefer.

This also includes making $0 in contributions and opting out of contributions altogether. In other words, you are not required to make annual solo 401k contributions to qualify for the tax credit.