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.