What happens to elective deferrals in a Solo 401(k) plan due to EGTRRA changes?

The elective deferrals in a Solo 401(k) plan were positively impacted by the changes brought about by the Economic Growth and Tax Relief Reconciliation Act (EGTRRA). This legislation increased the maximum annual contribution limits, allowing for greater contributions to retirement savings. As a result, the maximum elective deferral limit was increased, thereby enabling individual plan participants to save more in their Solo 401(k) accounts.

This change is significant as it allows self-employed individuals or owners of small businesses using a Solo 401(k) to take advantage of higher contribution limits, providing an opportunity to enhance their retirement savings potential significantly. By increasing the contribution limits, EGTRRA encourages long-term savings and enables individuals to better prepare for their retirement.