401k and SEP | Ed Slott and Company, LLC

401k and SEP

Can self employed person establish an individual 401k and a SEP in the same year and contribute to both as long as the sum of the contributions doesn't exceed the annual IRS limit? Thanks

  • You can NOT maintain a 5305-SEP IRA for the same tax year you maintain a one-participant 401k. Etrade, Fidelity, TD Ameritrade and Vanguard only offer 5305-SEP IRA accounts.
  • You CAN maintain a prototype SEP IRA  for the same tax year you maintain a one-participant 401k. Merrill Edge and Schwab offer prototype SEP IRA accounts.
  • You will have to verify with any other custodians if they have 5305-SEP IRA or prototype SEP IRA accounts.
  • As you noted, the sum of the one-participant 401k and SEP IRA employer contributions can not exceed your maximum allowed employer contribution. The sum of all employee and employer contributions from both plans can not exceed the annual addition limit.
 

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