If your compensation is below $58,000, you can. Just be sure the nontaxed portion meets all those separate requirements.* There are income limitations to consider. and can be viewed in 401(k) and Profit-Sharing Plan Contribution Limits. As to contributions, it states:
The annual additions paid to a participant’s account cannot exceed the lesser of:
- 100% of the participant's compensation, or
- $58,000 ($64,500 including catch-up contributions) for 2021; $57,000 ($63,500 including catch-up contributions) for 2020.
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However, an employer’s deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) cannot be more than 25% of the compensation paid (or accrued) during the year to eligible employees participating in the plan (see Employer Deduction in Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).
There are separate, smaller limits for SIMPLE 401(k) plans.
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