Two Jobs, Two 401(k)s? Contributing to Multiple 401(k) Plans

Can I contribute to more than one retirement plan? This is a common question for individuals that have more than one job or run their own business part-time. Many workers in this situation wonder if they can contribute to two 401(k)s at once. Yes, you can have multiple active 401(k)s, 403(b)s, SEP IRA, Solo 401(k) or other type of retirement plan at once. Your contributions as an individual can’t exceed the annual limit for all plans combined, but your employer can contribute the maximum in each unrelated plan.

Two Jobs, Two 401(k)s? Contribution Limits if You Have More Than One 401(k)

As previously mentioned, recall that contributions can be made to 401(k) plans in two ways: the individual deferral and the employer contribution, if any. The employer addition is typically profit-sharing, matching, or safe harbor. These respective limits also apply to those covered by more than one retirement plan.

How much can you contribute to your retirement account if you have more than one job?

Contribution limits for workers covered by multiple plans.

Individual contribution limits

The annual elective deferral limits apply to the individual, not the plan. So if you’re covered by a 401(k), 403(b), SIMPLE 401(k), or SIMPLE IRA, your individual contributions will be aggregated and cannot exceed the lesser of deferral limits set by the plan, 100% of your eligible compensation under the plan, or the maximum contribution limit as set annually by the IRS. See 2022 limits or 2023 limits.

Example 1: two 401(k)s

Mary is 48 years old and participates in two 401(k) plans: a traditional 401(k) and a Solo 401(k). She earns W-2 income of $150,000 at her full-time job and $50,000 per year in regular income for her side business where she has a Solo 401(k).

In 2023, the maximum Mary can contribute to both plans at the individual level is $22,500. This amount can be divided between both plans in any form she chooses or just invested in one plan or the other. Note: If Mary was saving with two traditional 401(k)s instead, the outcome would be exactly the same.

Mary is also eligible to receive employer contributions in both plans. If she has a profit-sharing component on her Solo 401(k), a profit sharing contribution can also be made of up to 25% of W-2 wages or 20% of net self-employment income for a partnership, sole proprietorship, or single-member LLC that has not elected to be taxed as a C-corporation or S-corporation. In 2023, the maximum overall funding in a 401(k) for both employee and employer contributions (under age 50) is $66,000.

Unlike individual contributions, employer additions follow the plan and not the taxpayer, increasing the savings potential.

Example 2: a 401(k) and a SIMPLE IRA

Robert is 40 years old and covered by both a SIMPLE IRA plan and a regular 401(k) plan. He earns W-2 income of $70,000 and $90,000 respectively. In 2023, the maximum Robert can contribute to both plans at the individual level is $22,500. This amount can be divided between both plans, but Robert cannot exceed the lesser annual contribution limit of $15,000 in his SIMPLE IRA.

He may also be eligible for employer additions in one, or both plans. SIMPLE plans have different rules for employer funding outside the scope of this article.

Employer 401(k) contribution limits if you have multiple jobs

Employer contribution limits for employees with multiple retirement plans

Annual employer contribution limits apply to each unrelated company’s specific retirement plan.  The employer contribution can be profit-sharing, matching, or safe harbor funding.

For 2023, the annual additions limit for employee and employer combined contributions for 401(k) plans is $66,000. Investors age 50 and over can also make a catch-up contribution of $7,500. The maximum total contribution for SEP IRAs is $66,000.

SEP IRAs are generally funded only by employer contributions. With the exception of the SEP IRA, defined contribution retirement plans may consist of funding at the individual and employer level.

The individual contribution limit cannot be exceeded regardless of how many 401(k)s or other employer retirement plans you’re eligible to participate in. However, each of your employers may still be able to contribute up to the maximum allowed per plan. Keep in mind the actual amount you (or your employer) can contribute will still be subject to your earnings, plan limitations, and other factors.

It is also important to note that if you own more than one business, consider consulting an advisor to ensure compliance with the controlled group rules set forth by the IRS and Department of Labor.

Can you contribute to a 401(k) and a SEP IRA at the same time?

As long as the plans are for two different businesses, then likely, yes. As explained above, SEP IRA contributions are made at the employer level. So if you have a 401(k) at work and are running a business on the side, you can set up a SEP IRA for that.

Your 401(k) contribution limits will be the same as the IRS limits for that year. Your SEP IRA contribution will be calculated as it would ordinarily.

What if you decided to open a Solo 401(k) instead of a SEP IRA? Your individual contribution would be capped at the annual additions limit across both plans. But you could still make an employer contribution for your side business or receive funds from your full-time job.

The rules change if the businesses are related: what’s a controlled group?

Controlled group classifications may treat multiple businesses with related ownership as one employer for retirement plan purposes. These rules were developed to prohibit business owners from forming a new company to exclude employees from the retirement plan.

The finer points of these determinations can get quite complex, but at a high level, a controlled group can be defined as:

• Parent-subsidiary group
  • When one or companies are connected through stock ownership with a common parent corporation and 80% or more of the stock of a corporation is owned by one or more corporations in the group (excluding the parent); and
  • The parent corporation owns at least 80% of one other corporation in the group
• Brother-sister group
  • At least two corporations where five or fewer common owners (individual, trust, or estate) have a direct or indirect ownership through attribution rules (typically 80%); and
  • At least five or fewer owners are considered to have “effective control.” Effective control is more complicated, but typically means that combined, owners control 50% or more of at least two corporations, assuming stock ownership is identical with respect to each corporation. In more simplistic terms, identical ownership means that if an owner has a stake in more than one company, the smallest percentage owned in any one company is used

Parent-subsidiary controlled group example: 

Delta Corporation owns the following interests:

• 85% of Bravo Corporation
• 60% of Lima Corporation
• 80% of Tango Corporation

Remaining ownership is owned by an unrelated party. Delta is considered to be in a parent-subsidiary controlled group with Bravo and Tango Corporations.

Now assume Tango Corporation owns 90% of Alpha Corporation. The result is that Delta is considered to be the parent of a parent-subsidiary controlled group with Bravo, Tango, and Alpha Corporations.

Brother-sister controlled group example:

Ownership breakdown for Alpha, Bravo, and Delta Corporations:

Ownership %

Alpha, Bravo, and Delta Corporations are considered to be a brother-sister controlled group because both tests are met. The same five or fewer individuals own at least 80% of each corporation and the same five or fewer individuals own more than 50% of each corporation, taking into account identical ownership.

Alpha and Bravo Test

                                      Ownership %

Alpha and Delta Test

                                     Ownership %

Bravo and Delta Test

                                      Ownership %

Getting closer to an early retirement by supercharging retirement savings

If you have a side hustle or multiple jobs, you may have the chance to accelerate your retirement wealth. Entrepreneurs should consider starting a Solo 401(k) or SEP IRA to reduce taxable income. Plan participants should understand the eligibility rules and options to receive employer contributions. Discuss your options with a fee-only financial advisor today.