You already understand why a one-participant beats the alternatives for . What stops most physicians is not the concept. It is the adoption agreement, the custodian comparison in which every option reads the same, the question of which deadline is the real deadline, and the quiet fear of doing something irreversible to a retirement account in December while post-call.
This is the operational version: what to choose, in what order, by when, and with what arithmetic. The conceptual case lives in the solo 401(k) and SEP IRA module; this article assumes you have decided and are now filling out forms.
Five plan features decide this, and assets under management is not one of them
Nearly every one-participant 401(k) holds the same index funds at the same expense ratios. The plan document is where the differences live, and four of the five items below are yes-or-no questions the sales page frequently does not answer. Ask them in writing before you open anything.
| Plan feature | Why it matters to a physician | What to ask |
|---|---|---|
| Designated Roth deferrals | Lets you place the employee deferral in Roth in a year your is temporarily low, such as a partial fellowship year | Does the plan document permit designated Roth elective deferrals? |
| Accepts incoming rollovers | This is the mechanism that empties a SEP or so the stops taxing your conversions | Will the plan accept a direct rollover from a SEP IRA and from a traditional IRA? |
| After-tax, non-Roth contributions with in-plan conversion | The two features that together make a mega-backdoor Roth possible; either one alone is useless | Does the document allow voluntary after-tax contributions and in-plan Roth rollovers? |
| Participant loans | Rarely the right move, but a provision you cannot add during an emergency if the document lacks it | Does the plan permit participant loans? |
| Fee structure | Some charge a flat annual document fee, some charge nothing, some charge per transaction | What is the annual document fee, and what is the fee to amend or restate? |
The single feature most likely to matter later is whether the plan accepts incoming rollovers, because that is what clears the pro-rata base blocking a clean backdoor Roth. A plan that cannot accept a rollover of your old SEP IRA is a plan you will be leaving in three years. The full repair sequence is in the backdoor Roth pro-rata fix.
Key insight
Prototype plan documents from large custodians are usually free but frequently omit after-tax contributions, in-plan Roth conversions, and loans. Custom or third-party administrator documents typically include all three and cost roughly $200 to $750 to establish plus an annual fee. If you have no interest in a mega-backdoor Roth and no need for loans, the free document is genuinely fine. If you do want those features, paying for the document once is cheaper than restating later.
Getting the plan open: EIN, adoption agreement, trust account
The setup itself is three steps and roughly two hours of work.
Get an EIN for the business. Apply online with the IRS at no cost. Use the business EIN rather than your Social Security number on the plan documents. If your business is a single-member LLC or a sole proprietorship without employees, the IRS does not require an EIN for income tax purposes, but the plan and the custodian will want one.
Execute the adoption agreement. This is the document that legally establishes the plan. You sign as the employer, name yourself as trustee, choose the plan's effective date, and elect the optional features listed above. Keep the signed original. It is the only proof the plan exists on the date you claim, and it is the first item requested if the plan is ever examined.
Open the trust account and file the deferral election. The investment account is titled in the name of the plan, not in your name. Separately, you make a written salary deferral election specifying the amount or percentage you are deferring. That election is a dated document you keep in your own files; it is not something you submit to anyone. Physicians who skip it are the ones who cannot substantiate a deferral three years later.
The deadlines are two different dates, and SECURE 2.0 moved only one of them
This is where most of the confusion sits, so take it slowly.
Before the SECURE 2.0 Act of 2022, a solo 401(k) had to exist by December 31 to receive anything for that year. Section 317 of that Act changed this for sole proprietors and single-member LLCs with no common-law employees: such an individual may adopt a plan after the end of the taxable year and, for the first plan year only, may make an elective deferral election with respect to the prior year's net earnings from self-employment.
The limitation is the part that gets missed. For that first-year retroactive deferral, both the election and the deposit must be completed by the original due date of your individual return, determined without regard to extensions. For the 2026 tax year that is April 15, 2027, even if you extend your return to October. The employer profit-sharing contribution is different and follows the ordinary rule: it may be funded through the extended due date of the return, which would be October 15, 2027 with a timely extension.
| Contribution or action | Deadline for the 2026 tax year |
|---|---|
| Establish a first-year plan, sole proprietor with no employees | Due date of the 2026 return, without extensions |
| First-year retroactive employee deferral: election and deposit | April 15, 2027, no extension available |
| Employee deferral, any year after the first | Election by December 31, 2026; deposit shortly after |
| Employer profit-sharing contribution | Extended due date, October 15, 2027 with a filed extension |
Important
In any year other than the plan's first year, the salary deferral election must be in place before the compensation is earned, and practically that means a signed election dated on or before December 31. There is no retroactive deferral election for an existing plan. If you intend to defer for 2026 through a plan you already have, sign the election this year rather than discovering the rule during tax preparation.
The contribution math is two calculations, and the employer side is 20 percent, not 25
The plan document says the employer may contribute up to 25 percent of compensation. For a self-employed person, compensation means net earnings from self-employment after deducting both one-half of self-employment tax and the plan contribution itself. That contribution appears on both sides of the equation, and solving the circularity produces the familiar 20 percent figure. The IRS publishes this in the rate table in Chapter 5 of Publication 560: a 25 percent plan rate corresponds to a 20 percent self-employed rate.
The 0.9235 factor is the other constant. Net earnings from self-employment equal 92.35 percent of net Schedule C profit, which is the mechanism by which the deduction for the employer-equivalent half of self-employment tax is applied.
Example calculation
Assumptions, stated explicitly: 2026 tax year. Physician with no W-2 employment this year. Net profit on Schedule C of $90,000 from locums and telehealth work. Solo 401(k) established and deferral election signed. Total wages below the $184,500 Social Security wage base, so the full 15.3 percent self-employment rate applies. 2026 limits from IRS Notice 2025-67.
Step 1 — net earnings from self-employment: $90,000 x 0.9235 = $83,115
Step 2 — self-employment tax: $83,115 x 0.153 = $12,716.60 Deductible half: $12,716.60 / 2 = $6,358.30
Step 3 — adjusted net earnings, the employer contribution base: $90,000 - $6,358.30 = $83,641.70
Step 4 — employer contribution at the self-employed rate: $83,641.70 x 0.20 = $16,728.34
Step 5 — employee elective deferral, 2026 402(g) limit: $24,500
Total contribution: $24,500 + $16,728.34 = $41,228.34 2026 section 415(c) annual additions limit: $72,000 Headroom remaining: $30,771.66
Sheltered share of net profit: $41,228.34 / $90,000 = 45.8 percent
Note what the headroom means. The $72,000 limit is not reached at $90,000 of profit through deferrals and profit sharing alone. Filling it requires either substantially more profit or the after-tax contribution route, which is precisely why the after-tax and in-plan conversion features on the checklist above are worth confirming before you open the plan.
Year one with a hospital 403(b) is the case that trips physicians up
Most physicians reading this are not purely self-employed. They have a hospital or academic W-2 job with a and a 1099 side practice. Two separate rules apply, and they behave differently.
The 402(g) deferral limit is per person, not per plan. The $24,500 elective deferral limit for 2026 is yours in total across every 401(k) and 403(b) you participate in. If your 403(b) already received $24,500 through payroll, your solo 401(k) employee deferral for that year is $0. Only the employer profit-sharing contribution remains available, which is the 20 percent calculation above.
The 415(c) annual additions limit is normally per unrelated employer — but not here. Ordinarily, an unrelated employer's plan carries its own $72,000 annual additions limit. A 403(b) is the exception. Under Treasury Regulation section 1.415(f)-1(f), where a participant controls another employer, the 403(b) annuity is treated as a defined contribution plan maintained by the participant and is aggregated with all other defined contribution plans maintained by that participant or by any employer the participant controls. The regulation's own illustration is a physician with a hospital 403(b) and a majority-owned professional corporation. Control is a more-than-50-percent test under section 415(h).
The practical translation: if you own the business sponsoring your solo 401(k), your hospital 403(b) annual additions and your solo 401(k) annual additions likely share one $72,000 ceiling for 2026 rather than getting $72,000 each. This is a genuine and frequently missed constraint, it is fact-specific, and it is worth ten minutes with your CPA before you fund a large employer contribution. The broader picture of which account fills in which order is mapped in the retirement account map.
Quick takeaway
The correct year-one sequence for a physician with both incomes: confirm what your 403(b) will receive in deferrals for the full year, deposit no employee deferral in the solo 401(k) if that number reaches $24,500, compute the employer contribution from actual Schedule C profit after year-end, then check the aggregate 415(c) position across both plans before funding. Doing the employer contribution last, from real numbers rather than projections, avoids an excess contribution correction.
Form 5500-EZ arrives at $250,000, and the plan does not remind you
A one-participant plan is exempt from annual reporting until plan assets reach a threshold. The IRS states the rule plainly: a one-participant plan must file an annual return if it has $250,000 or more in assets at the end of the year. Below that, the plan is generally exempt. A final return is also required in the year the plan terminates, regardless of asset level.
Two details worth holding. The threshold counts total plan assets, which includes rolled-in balances — so rolling a $190,000 SEP IRA into a new solo 401(k) can push the plan across $250,000 in its very first year. And the penalties for non-filing are assessed per day. There is a voluntary correction program with a reduced penalty for one-participant plans that missed filings, but the fix is far cheaper than the discovery.
Put a recurring July reminder on your calendar, and check the December 31 plan balance every year once you are within $50,000 of the threshold.
Common questions
Can I open the plan now and fund it later?
Yes, and that is usually the right approach. Employer contributions may be deposited through the extended due date of your return. Employee deferrals for an existing plan require an election signed before the compensation is earned, so open the plan and sign the election early even if the money moves in April.
What if I hire an employee?
A one-participant plan works only while the business has no eligible common-law employees other than you and a spouse. Once you hire someone who meets the plan's eligibility conditions, the plan is subject to coverage, nondiscrimination, and full Form 5500 reporting. Talk to a third-party administrator before the hire, not after.
Should the employee deferral be traditional or Roth?
It depends on your marginal rate this year against your expected rate in retirement. A resident or fellow with a partial year of 1099 income, or a physician taking a low-income year, has a real case for Roth. An attending in a high bracket in a high-tax state usually does not. The employer contribution has historically been pre-tax by default, and SECURE 2.0 permits designated Roth employer contributions only if the plan document adopts them.
I also have a SEP IRA. Does it need to move?
If you intend to do backdoor Roth conversions, yes, because SEP IRA balances sit in the pro-rata base and taxable balances there make every conversion partly taxable. Rolling the SEP into a solo 401(k) that accepts rollovers removes it from that base. The head-to-head is in SEP IRA versus solo 401(k).
What to do next
- Email two or three plan custodians the five checklist questions above and require written answers. This costs nothing and eliminates most candidates in a day.
- Apply for an EIN online at no cost if the business does not already have one.
- Execute the adoption agreement, name yourself trustee, and save the signed document with your permanent tax records.
- Sign and date a written salary deferral election before December 31, stating the dollar amount or percentage, and file it with your own records.
- Pull your 403(b) year-to-date deferral total from your last pay statement to confirm how much of the $24,500 remains before you defer anything into the solo 401(k).
- Compute the employer contribution after year-end from your actual Schedule C profit using the 0.9235 and 20 percent steps above, then fund it before the extended due date.
- Check the December 31 plan balance each year against the $250,000 Form 5500-EZ threshold, and treat any incoming rollover as counting toward it.
None of this requires special access or a relationship with anyone. The adoption agreement is a form, the arithmetic is four lines, and the deadlines are two dates. Our 1099 tools can hold the calendar for you, though the protocol above works with or without us. This is education, not individualized financial advice.