If you’re a self-employed 401(k) participant, this article explains why we deposit employer contributions separately from your owner contributions—and when to expect them.
As a self-employed person, your employer contributions are based on your earned income (your net self-employment earnings for the year). Generally, you cannot determine your actual earned income until well after the last day of the year, when you prepare your personal income tax return.
Because of this, we cannot calculate or deposit your employer contributions at the same time as your elective deferrals.
Even though you will not know your earned income until after the end of the plan year, you need to make your elective deferral contribution election on or before Dec. 31 of that year.
Learn more about how to request owner contributions and report self-employed income for different entity types.
Once we have your earned income and share of expenses (if your entity is a partnership), we calculate the combined amount of these contributions.
Elective deferrals (which were likely already deposited)
Your share of any employer matching contributions or non-elective contributions you’re entitled to
We deposit these contributions in a single sum. If your plan participates in profit sharing, we calculate these contributions at the same time as profit sharing.
We’ll prompt administrators of your Gusto 401(k) plan to confirm your earned income for the previous year through a task on their Gusto Retirement administrator dashboard in the first quarter (Q1) of the following year.
Here’s what happens once the task is done.
We automatically process employer contributions at the same time as profit sharing, if applicable. Once profit sharing expires or is dismissed, we calculate the amount.
We send an email with the calculated amount, giving the administrator five business days to review and request clarification if needed.
Important: Extensions to the plan sponsor’s tax filing may allow more time to process profit sharing and employer contributions for owner’s draws. Communicate any extensions to the original tax deadline to Gusto Retirement.
This article is for informational purposes only and is not intended to be construed as tax advice. You should consult a professional tax advisor to determine a strategy that fits your needs.