Can I Have Two 401(k) Plans at the Same Time?

If you hold two jobs with separate employers or worked for more than one employer during the tax year, you can be in a tax-deferred 401(k) retirement plan with each of your employers. There are no rules or laws preventing you from having two or more 401(k) plans at the same time, but enrollment in multiple plans can affect your tax deduction for elective contributions to your 401(k) retirement accounts.

IRS Contribution Limits

The IRS as of 2012 allows you to deduct up to $17,000 in elective 401(k) contributions during the tax year, or up to $22,200 if you are 50 or older. The catch is that the limit applies to all your 401(k) plans collectively, not to each plan individually. For instance, if you are 49 years old and you have two 401(k) plans from two separate employers and contributed $10,000 to one of them, you can contribute no more than $7,000 to the other plan in the current calendar year.

Lower Plan Limits

You may not be allowed to make the maximum contributions allowed by the IRS in deductible 401(k) contributions if your 401(k) plans collectively set a lower limit on elective contributions. For instance, if your 401(k) Plan A with one employer set a contribution limit of $6,000 and the 401(k) Plan B of your other employer set a limit of $7,000, your contribution limit would be reduced to only $13,000.

Catch-up Contributions

If you are age 50 or older in 2012, you can make the additional $5,500 in deductible “catch-up” contributions to your 401(k) plan for a total of $22,500 in deductible contributions. This total applies to all your 401(k) plans collectively, not to each individually, but there is a potential benefit for people over age 50 who have multiple 401(k) plans. Normally, each plan has the right to determine whether it will permit catch-up contributions, but if you have more than one 401(k) plan, you can make the additional $5,500 deductible catch-up contribution even if none of the plans permit catch-up contributions.

Other Limits

The tax code’s limit on the total amount of 401(k) contributions that can be made by you or on your behalf by an employer each year applies to all of your 401(k) plans collectively, not to each individual plan. As of 2012, contributions to your 401(k) by you and your employers combined cannot exceed the lesser of your annual gross salary or $50,000.

About the Author

Herb Kirchhoff has more than three decades of hands-on experience as an avid garden hobbyist and home handyman. Since retiring from the news business in 2008, Kirchhoff takes care of a 12-acre rural Michigan lakefront property and applies his experience to his vegetable and flower gardens and home repair and renovation projects.

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