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How to Formally Elect Your Contribution by the December 31st deadline
How to Formally Elect Your Contribution by the December 31st deadline
Updated over a week ago

Now that your Solo 401k plan is officially established, your next step is to fund your new retirement plan.

There are two ways to fund a retirement account:

  1. Rollovers

  2. Contributions

Rollovers can happen anytime during the year. There are no dollar or time limits on the amount of rollovers you can make into your Solo 401k plan. Rollovers are calculated separately from contributions.

This means the amount you rollover into your Solo 401k plan does not affect the amount you can contribute to your Solo 401k plan.

While rollovers can happen anytime during the year, the IRS has specific guidelines on when contributions must be made to your plan.

There are two types of contributions allowed in th Solo 401k:

  1. Elective deferrals (employee)

  2. Profit sharing contributions (employer)

Elective deferrals (employee contributions) must be formally elected by December 31st.  The actual deposit may be made  by the "due date of employer's return (including extensions)" (IRS Source)

Formal election simply means you are documenting that you plan to make elective deferrals into your plan, and typically are documenting how much you plan to contribute. 

The contribution form should be completed by December 31st of each year. You should keep a copy for your records, and share a copy with your CPA. Your contribution form does not need to be sent to Nabers.

If you complete the formal election by December 31st of each year, you have until you file your tax returns for the following year to make the deposit.

Formally elect to make contributions by December 31st, 2023
Make 2023 contributions up until April 18, 2024 (so long as amounts reflect what you've notated in your formal election)

From IRS Publication 560:

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