Participation In Multiple Retirement Plans
Can a person who works at two different, unrelated companies participate in the retirement plan offered by each of those businesses?
Yes.
Can this same person receive the maximum annual contributions into BOTH plans?
Yes, under the right circumstances. Also recognize that there are limits on the type of dollars that can flow into plans. For example, some plans, like 401(k)s, can receive salary deferrals made by the worker as well as company contributions, like matching dollars or profit share money. Some plans only allow for employer contributions.
So how does this all work, and what are the restrictions?
In this space, we must keep the conversation at a very high level. This article only scratches the surface. Be sure to consult with a knowledgeable advisor before diving into multiple plans. There are clear guidelines that must be followed. For example, a person (or the same ownership group) cannot open multiple businesses and establish a separate retirement plan for each of those businesses. Also, recognize that there is an aggregated cap on employee salary deferrals. For 2025, the regular contribution limit is $23,500, plus $7,500 for those age 50 and over ($11,250 catch-up for those ages 60-63). These limits are per person, NOT per plan.
For those who are fortunate enough to have access to multiple retirement plans, the ability to put away a significant amount of money is there…if the cards are played right. It is important to understand the difference between plans and the type of dollars being contributed.
Example
James, age 55, works for a large company. He participates in the 401(k) where he defers from his salary the maximum amount of $31,000. (This includes the $23,500 regular contribution plus the $7,500 age-50 catch-up.) The 401(k) offers a percentage match AND a profit share. These employer dollars could potentially bring James’ total contributions into the 401(k) up to the 2025 maximum of $77,500. (While the regular maximum for 2025 is $70,000, the age-50 catch-up allows James to go $7,500 over that cap to get to $77,500.)
In his spare time, James runs his own successful consulting business as a sole proprietor. James would like to establish a retirement plan for his own business, but he is unsure which type of plan to install. If James decides to start a Solo 401(k), he cannot make any additional employee salary deferrals this year because he already reached his annual aggregated cap of $31,000 in the other company plan. Employer contributions – like a profit share – could be made to James’ own Solo(k), but that may not be worth the relatively high administrative expense of a Solo 401(k). James decides that the Solo(k) is not for him.
Instead, James opts for a SEP IRA plan, which typically has lower expenses. Employees cannot make contributions to a SEP. Only employer contributions are allowed. Based on the earnings from his small business, James is eligible for the maximum contribution. James puts on his employer hat and makes a $70,000 contribution to his own SEP IRA. (Since employees cannot make contributions to a SEP, there is no option for catch-up contributions, so the maximum 2025 SEP contribution for James is $70K.) By participating in two plans at two unrelated companies, James is able to defer a total of $147,500 into retirement plans in 2025.
The point here is that a person CAN participate in multiple retirement plans and CAN (potentially) defer more than the 2025 annual limit of $70,000. However, we cannot stress this enough: do not play around with multiple plan participation without consulting with a knowledgeable advisor.
By Andy Ives, CFP®, AIF®
IRA Analyst
Ed Slott and Company, LLC
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.
