Contributing to Solo 401k but has eligible EE

I have a potential client approach me with the following situation:

Established a Solo 401k in 2021 (he was only employee) & contributed for 2021, 2022.  He hired a full-time employee in the beginning of 2023.

The eligibility requirements (if relevant) were non-existent in the Solo 401k document (immediate entry).

For 2023, contributions were made & deducted for the owner, nothing for the EE.

For 2024, contributions have been made already for the owner.

What are his options for both fixing 2023 & making sure that the contributions made for 2024 are allowable? If I open a Qualified Plan effective for 2024, can he make the contributions for the EE covering both years?  Essentially, is this something that falls under the ability to "self-correct"?

Thank you

Hey, if the taxes were extended until 10/15/2024 it's still not too late yet to allocate annual additions for the 12/31/2023 plan year.  Also, the types of contributions already made might provide a little more into what he's on the hook for, relating to the employee.

1 hour ago, Lou S. said:

Well for 2023 you can test otherwise excludable separately so you shouldn't have an ADP testing failure.

For 2023 you'll need at least a top heavy minimum for the employee and a QNEC for the missed deferral opportunity. But you should be able to self correct under recent IRS guidance and the most recent EPCRS procedure.

For 2024 the solo-k should just be restated, no need to open a 2nd plan. Look at the EPCRS procedure for any additional missed deferral opportunity than may be required.

You are also going to have 401(k) testing and TH minimum so you might want to consider adding a 3% safe harbor non elective prior to November 30.

Thank you!  This makes complete sense & what I was inclined to do.  100% going to add a SH provision.

Now my main hurdle is that the owner is self-employed so I need to make sure that he has enough income to support what he's already done for 2024 + the cost of the employee.