Mechanics of and deadlines for "Solo" 401(k) plans


Rich Carreiro

I have a relative who later this year may be making the
switch from employee to consulting (as a sole proprietor).
He's currently contributing to a 401(k) at work, but
probably won't be able to max out the full $15K employee
contribution before becoming a consultant, so he's thinking
of opening a "solo" 401(k) and "topping off" the balance of
the allowed $15K deferral plus making a profit-sharing
contribution. He would be the only plan participant (has no
spouse or employees).

I've read Pub 560 (which doesn't seem all that oriented
toward the self-employed -- the IRS should make a version of
560 that's specifically geared at the self-employed) and
have looked at materials from a couple of brokers who offer
self-employed 401(k) accounts, but remain confused on some
finer points.

(a) Can a self-employed person make "deferral" contributions
on self-employment income received prior to the plan being
set up, or can only SE income received after the plan is
set up be available for "deferral" contributions?
(b) Same as (a), but substitute "profit-sharing" for "deferral".
(c) What is the deadline for making "deferral" contributions?
Is it 31 December or 15 April?
(d) What is the deadline for making "profit-sharing"
contributions? 31 December ot 15 April?
(e) Does the self-employed person have to adopt in writing
a "deferral" contribution amount? Can that be done
after the fact (and if so, by 31 Dec or 15 Apr?), or
does he have to do it before receiving any SE income
he wants to defer?
(f) Same as (e), but with respect to "profit-sharing" contribs.
(g) Do "deferral" contribution have to be made as-you-go, or
can they be made in a lump at the end of the year when
you what the business's profit will be (so that you don't
accidentally make "deferral" contributions in excess of
what profit turns out to be).

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