Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Comparison tables scroll horizontally on smaller screens.
Updated July 28, 2026. Quick answer: They are on top, not inside. IRC §414(v)(3)(A)(i) provides that a catch-up contribution “shall not … be subject to any otherwise applicable limitation contained in sections 401(a)(30), 402(h), 403(b), 408, 415(c), and 457(b)(2).” That single exemption is why a solo 401(k) beats a SEP at every income level for anyone old enough — the usual crossover never arrives.
Why this changes the plan comparison
The standard comparison says a solo 401(k)’s advantage over a SEP shrinks as income rises, because at high enough income the employer contribution alone reaches the annual additions limit and the employee deferral has nowhere to go. True — for someone under 50.
For anyone eligible for catch-up contributions the logic breaks, because the catch-up is not competing for room under §415(c). It sits outside the cap entirely. So the crossover income where a SEP catches up simply does not exist for a catch-up-eligible owner — and a SEP cannot offer a catch-up at all, because it takes no employee deferrals.
The stack, in order
| Layer | Governed by | Inside the annual additions limit? |
|---|---|---|
| Employee elective deferral | §402(g)(1) | Yes |
| Employer contribution | §404(a)(3)(A) / §404(h)(1)(C) | Yes |
| Catch-up contribution | §414(v) | No — §414(v)(3) |
Note also that §404(n) keeps elective deferrals out of the employer’s 25% deduction limit, which is a separate constraint from §415(c) and is why the two stack cleanly rather than crowding each other.
The catch-up amount is larger still between 60 and 63 — on a formula most sources state incorrectly — and whether it can be pre-tax is a live question as of 2026.
Every dollar limit in this area is indexed and changes annually. The figures printed in the Code itself — $40,000 for the defined-contribution limit, $160,000 for the defined-benefit limit, $15,000 for elective deferrals — are 2001 and 2005 base amounts that will never be updated in the statute; IRC §415(d) and §402(g)(4) do the adjusting. Get the current year’s figures from the IRS cost-of-living notice for that year rather than from any article, including this one. Nothing on this page states a dollar amount for that reason.
Sources
IRC §414(v)(1), (v)(2)(B), (v)(2)(C), (v)(2)(E) and (v)(3); §414(v)(7) (the Roth catch-up requirement) and (v)(7)(E) (its indexing); §402(g)(1) and (g)(4); IRS Notice 2023-62 (the administrative transition period); T.D. 10033, final regulations, Internal Revenue Bulletin 2025-40. All read July 2026.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.
Related
If the gap is real, the contribution side is the first lever: what the full catch-up stack is worth — including the age 60-63 window, which is the largest contribution allowance that exists and lasts exactly four years.
The larger version, inside the 401(k): the mega backdoor fills the gap up to $72,000 — the 2026 annual additions limit — using after-tax contributions, with catch-up allowances sitting outside that limit entirely. It depends on two optional plan features, so check those first.