Nov 07

Are You Eligible for a Self-Employed 401(k) Plan?

A Self-Employed 401(k) Plan, also called a  Solo 401(k) Plan, is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. A Solo 401(k) plan is perfect for any sole proprietor, consultant, or independent contractor.

To be eligible to benefit from the Solo 401(k) plan, investor must meet just two eligibility requirements:

1. The presence of self employment activity.

2. The absence of full-time employees.

The Presence of Self Employment Activity

Self employment activity generally includes ownership and operation of a sole proprietorship, Limited Liability Company (LLC), C Corporation, S Corporation, and Limited Partnership where the business intends to generate revenue for profit and make significant contributions to the plan.

Are You Eligible for a Self-Employed 401(k) Plan?Generate Revenue for Profit

There are no established thresholds for how much profit the business must be generated, how much money must be contributed to the plan, or how soon profits and contributions must happen. It is generally believed that the IRS will consider you eligible if the business being conducted is a legitimate business that is run with the intention of generating profits. The self employment activity can be part time, and it can be ancillary to full time employment elsewhere. A person can even participate in an employer’s 401(k) plan in tandem with their own Solo 401(k). In such a case, the employee elective deferrals from both plans are subject to the single contribution limit.

The Absence of Full-Time Employees

Unlike a regular 401(k) plan, a Solo 401K plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees and are not employed by any business owned by them or their spouse (an exception applies if your full-time employee is your spouse). The business owner and their spouse are technically considered “owner-employees” rather than “employees”.

The following types of employees may be generally excluded from coverage:

  • Employees under 21 years of age
  • Employees that work less than a 1000 hours annually
  • Union employees
  • Nonresident alien employees

If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up. However, a Solo 401k eligible business can have part time employees and independent contractors.

Please contact one of our 401(k) Experts at 800-472-0646 for more information.

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May 22

Why a Solo 401(k) is the Best Retirement Plan for the Self-Employed

Here’s a great article from Dough Roller touting the advantages of the Solo 401(k) Plan

If you’re self-employed, you have several retirement plan options available to you as an individual or small business owner. The best retirement plan for the self-employed, though, is probably the Solo 401(k).

Also called an individual 401(k), it has similar advantages to the traditional, employer-sponsored 401(k) plans available to large companies. However, it brings with it more benefits because you’re self-employed.

How a Solo 401(k) Plan Works

A Solo 401(k) plan is essentially a 401(k) for a self-employed individual. But there are several features of the plan that distinguish it from the larger, employer-based 401(k) plans. These include:

  • Since you are the business owner, you act as both employer and employee on the plan.
  • A Solo 401(k) plan is just for the owner of the business and the owner’s spouse; it is not available for employees of the business.
  • The amount you can contribute to a Solo 401(k) are generally more generous than they will be for an employee participant in typical large company 401(k) plans.
  • You can set up a Solo 401(k) even if you are an independent contractor or a freelancer.

Solo 401k Contribution Limits

As an employee of the business, contribution limits to a solo 401(k) plan are exactly the same as they are for a traditional 401(k) plan. You can contribute up to 100% of your salary or up to the contribution limit, whichever is greater. The current contribution limit for 2017 is $18,000 of your salary, or up to $24,000 if you’re age 50 or older.

It’s here that being the employer comes in handy.But since you are also the employer in the solo plan, you can also contribute as much as 25% of your net income to the plan as a profit-sharing contribution. (See IRS examples of the

As an employer, you can also contribute as much as 25% of your net income to the plan as a profit-sharing contribution. (See IRS examples of the employer matching contribution — it varies by business entity.)

Solo 401k Contribution Deadline

One other important point about the solo 401(k) plan is that you must make your contributions to the plan no later than the end of the calendar year. That means that you must make your contribution no later than December 31 in order for the contribution to be deductible for the tax year in question.

This is unlike contributions to IRA plans, which allow you to make deductions up until the filing deadline for the preceding tax year.

Simplicity

One of the biggest advantages of a Solo 401(k) is that you can essentially set it up similar to a self-directed IRA. That means that you are free to choose your investment trustee. You can also select a discount investment broker. This will provide you with an opportunity for unlimited investments and very low fees.

This is unlike many traditional 401(k) plans, which often limit your investment options to a few mutual funds and charge high plan fees.

Very Generous Contributions

As I noted above, with the Solo 401(k) you can make both employee and employer contributions. So, let’s say you’re self-employed as a sole proprietor and report your income and expenses on Schedule C of your income tax return. If your net income from the business is $100,000, you can contribute $18,000 as an employee. But then you can also contribute 25% of the net profit as the employer.

This means that your total contribution could reach $43,000!

That’s an enormous retirement contribution based on a $100,000 income. If you are in the 25% federal tax bracket, for example, a $43,000 contribution could result in a tax savings of $10,750 (although it’s important to consult a tax expert to be sure).

This is much more generous than other types of self-employed retirement plans. For example, let’s take the contribution scenario above. In it, you are contributing 43% of your income to your retirement plan using the Solo 401(k).

SEP IRA

Under a SEP IRA, your contribution would be limited to 20% of the same income, or $20,000. (The SEP IRA provides for a deduction equal to 25% of your net income, after the deduction for the contribution is removed from your income… That means that the net contribution to a SEP IRA is effectively limited to 20% of your income.)

SIMPLE IRA

Under a SIMPLE IRA, your contribution limit is even lower. The maximum contribution that you can make as an employee is $12,500. (This bumps up to $15,500 if you are age 50 or older.) SIMPLE IRAs also provide for an employer match. As the employer in the business, you can provide either a 3% matching contribution, or a 2% non-elective contribution (up to $5,000). That means that your total contribution to the plan is limited to a total maximum of $20,500 per year.

Traditional IRA

And, of course, a traditional IRA or a Roth IRA limits your annual contribution to $5,500, or $6,500 if you are 50 or older.

The maximum contribution to any and all tax-sheltered retirement plans, including the Solo 401(k) plan, is $54,000 for 2017. However, with a Solo 401(k) plan, you can reach that maximum much more quickly than you can with other self-employed retirement plans.

There is one important limitation pertaining to S corporations: distributions paid from an S corporation are considered dividends, and are therefore not considered earned income. For this reason, you cannot make contributions to a Solo 401(k) plan that include your distributions from the S Corp.

You Can Add a Solo Roth 401(k) to the Mix

Just as with a traditional 401(k), you can allocate part of the plan to a Solo Roth 401(k) plan. That will enable you to allocate up to $5,500 of your employee contribution to the Roth portion. If you are age 50 or older, up to $6,500 can go toward the Roth portion. The remainder of your allowed contribution will go into the regular portion of your Solo 401(k) plan.

The employer matching portion can only go into the regular part of your Solo 401(k), and not the Roth portion.

You Can Include Your Spouse

An owner cannot add employees to a Solo 401(k) plan. He or she can, however, add a spouse. Your spouse can make contributions based on his or her earnings from the business.

For example, let’s say that you have an S corporation. You take a salary of $50,000 per year, and your spouse takes an equal amount. You can each make a contribution of up to $18,000 on your respective salaries. As an employer, you can then match up to 25% of the same amount.

Converting the Solo 401(k) to a Traditional 401(k)

Many businesses start out as one-person affairs. The owner starts out working for himself and only adds employees as the business grows.

A Solo 401(k) plan really shines when you hire employees. Why? Because you can convert these plans to a traditional 401(k) plan as soon as you begin adding employees.

When you start adding staff, you can easily convert your Solo 401(k) to a traditional plan. As you do, you can enable your employees to participate in the plan. That’s a big advantage because offering a 401(k) plan — particularly as a small business — is an attractive advantage for drawing potential talent. Many employees prefer to work in a business that offers a retirement plan. With the Solo 401(k), you will already have a plan in place when that day comes.

As with all things related to retirement plans, be sure to consult a tax expert before making any decisions.

If you would like more information about the Solo 401(k) plan, please contact a 401(k) at the IRA Financial Group at 800.472.4646.

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Jul 19

What are the Eligibility Requirements for an Individual 401(k) Plan?

An Individual 401(k) Plan plan is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. An Individual 401(k) Plan is perfect for any sole proprietor, consultant, or independent contractor.

To be eligible to benefit from the Individual 401(k) Plan, investor must meet just two eligibility requirements:

1. The presence of self employment activity.

2. The absence of full-time employees.

The Presence of Self Employment Activity

Self employment activity generally includes ownership and operation of a sole proprietorship, Limited Liability Company (LLC), C Corporation, S Corporation, and Limited Partnership where the business intends to generate revenue for profit and make significant contributions to the plan.

Generate Revenue for Profit

There are no established thresholds for how much profit the business must be generated, how much money must be contributed to the plan, or how soon profits and contributions must happen. It is generally believed that the IRS will consider you eligible if the business being conducted is a legitimate business that is run with the intention of generating profits. The self employment activity can be part time, and it can be ancillary to full time employment elsewhere. A person can even participate in an employer’s 401(k) plan in tandem with their own Individual 401(k). In such a case, the employee elective deferrals from both plans are subject to the single contribution limit.

The Absence of Full-Time Employees

Unlike a regular 401(k) plan, an Individual 401(k) Plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees and are not employed by any business owned by them or their spouse (an exception applies if your full-time employee is your spouse). The business owner and their spouse are technically considered “owner-employees” rather than “employees”.

The following types of employees may be generally excluded from coverage:

  • Employees under 21 years of age
  • Employees that work less than a 1000 hours annually
  • Union employees
  • Nonresident alien employees

If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up. However, an Individual 401(k) eligible business can have part time employees and independent contractors.

Please contact one of our 401(k) Experts at 800-472-0646 for more information.

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Jan 05

What Exactly is a Solo 401(k) Plan?

401k plans are defined in the Internal Revenue Code (Section 401) as retirement savings trusts. A 401(k) Plan is an IRS approved qualified retirement plan. As the name implies, the Solo 401(k) plan is an IRS approved qualified 401(k) plan designed for a self-employed individual or the sole owner-employee of a corporation. It works best when there are no other employees or a very small number of employees.

In 2001, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) was passed. This act clarified how a 401(k) could be used by a self employed person who has no full time employees. It also clarified that the self-employed 401(k) participant can make contributions as the role of employee and employer resulting in very high contribution limits.

To access these benefits an investor must meet two eligibility requirements:

1. The presence of self employment activity.

2. The absence of full-time employees.

A Solo 401(k) offers a self-employed business owner the ability to use his or her retirement funds to make virtually any type of investment on their own without requiring the consent of a custodian. The IRS only describes the type of investments that are prohibited, which are very few. In addition, a Solo 401(k) plan offers a high annual contribution limit (up to $59,000), allows you to borrow up to $50,000 for any purpose, and imposes no custodian fees.

The Advantages of Using a Solo 401(k)?

What Exactly is a Solo 401(k) Plan?The Solo 401(k) plan offers most of the characteristics of the Self Directed IRA LLC, including having the ability to make almost any type of investments, including real estate, but without the need to establish an LLC or pay custodian fees.  The Solo 401(k) Plan is the most tax-advantageous retirement plan available because of its very high annual contribution limits. The Solo 401K plan also allows you to borrow money from your retirement funds (up to $50,000) and use the funds for any purpose, including help finance your business or pay personal bills.

Am I Eligible to use the Solo 401K Plan?

The Solo 401(k) plan may be used by any individual who is already a business owner or who will be establishing a business and does not have, or plan to have, full-time employees. The Solo 401(k) plan is perfect for independent contractors, such as consultants, home businesses and real estate agents. The owner’s spouse may also contribute to the plan as long as he or she is an employee of the business.

Use the Solo 401K Plan to Take out a Loan

One of the advantages of the Solo 401K plan is that it allows you to take out a loan from your retirement account. Under Internal Revenue Code Section 72(p), a Solo 401(k) Plan participant is permitted to borrow up to 50% of the total 401(k) value or $50,000 whichever is less tax-free for any reason. Repayment of the loan is based on a schedule provided when the loan is initiated and must be paid back into the account (including interest) over a term of up to five years. Loan payments must be made at least quarterly and at a minimum interest rate of Prime (as of 12/21/15, the Prime interest rate as per the Wall Street Journal is 3.50%). Failure to make the loan payments may cause a loan default causing taxes and IRS penalties.

For Real Estate Investors

Like the Self-Directed IRA LLC structure, the Solo 401K Plan offers participants the ability to invest in real estate tax-free! All income and gains generated by the investment will flow back to the 401(k) Plan tax-free!

In addition, in the case of an IRA using nonrecourse debt to finance a real estate purchase (only nonrecourse debt is permitted as recourse debt associated with an IRA investment would trigger a prohibited transaction), income or gains generally from the investment would trigger a penalty tax called the Unrelated Debt Financed Income (UDFI) tax. UDFI is a type of unrelated business taxable income which if triggered could subject the IRA to close to a 40% tax for 2016. However, a 401(k) Plan using nonrecourse financing for a real estate investment is exempt from the UDFI tax (Internal Revenue Code Section 514(c)(9).

How do I Initially fund the Solo 401K Plan?

Like the Self-Directed IRA LLC, to initially fund the Solo 401(k) you may rollover funds from Traditional IRAs, SEP Plans, previous employer 401(k) plans, Money Purchase plans, Profit Sharing plans, Keogh plans, Defined Benefit plans, 403(b) plans and Rollover IRAs tax-free! This is accomplished by setting up a Trust account for the Solo 401(k) and directly transferring the funds from the current Custodian to the trust bank account. The trust account can be opened at any local bank or credit union.

How much Money Can I Contribute to the Solo 401K Plan?

Under the 2016 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $18,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $53,000.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $24,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $59,000, an increase of $1,500 from 2014.

Calculate Your Solo 401k Plan Maximum Contribution Limit Please click here to calculate your Solo 401(k) Plan Maximum Contribution Limit.

The Trustee

For a Solo 401K plan, a Trustee must be designated to hold the assets of the retirement plan. In the case of the Solo 401(k), you are able to act as your own Trustee and are responsible for investing trust assets prudently and productively. In other words, as Trustee of the 401(k) Plan, you will have “Checkbook Control” over the Plan assets allowing you to make investments by simply writing a check from your 401(k) Trust account. As a result, the Solo 401(k) Plan is perfect for making real estate or tax lien investments. Note – The Trustee is prohibited from benefiting directly from the trust and cannot co-mingle personal funds with the trust or enter into a transaction with the trust.

Please contact one of our Solo 401(k) Experts at 800-472-0646 for more information.

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Sep 23

What Are the Requirements to Open a Solo 401k?

A Solo 401(k) Plan is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. A Solo 401(k) plan is perfect for any sole proprietor, consultant, or independent contractor.

To be eligible to benefit from the Solo 401(k) plan, investor must meet just two eligibility requirements:

1. The presence of self employment activity.

2. The absence of full-time employees.

The Presence of Self Employment Activity

Self employment activity generally includes ownership and operation of a sole proprietorship, Limited Liability Company (LLC), C Corporation, S Corporation, and Limited Partnership where the business intends to generate revenue for profit and make significant contributions to the plan.

Generate Revenue for Profit

There are no established thresholds for how much profit the business must be generated, how much money must be contributed to the plan, or how soon profits and contributions must happen. It is generally believed that the IRS will consider you eligible if the business being conducted is a legitimate business that is run with the intention of generating profits. The self employment activity can be part time, and it can be ancillary to full time employment elsewhere. A person can even participate in an employer’s 401(k) plan in tandem with their own Solo 401(k). In such a case, the employee elective deferrals from both plans are subject to the single contribution limit.

The Absence of Full-Time Employees

Unlike a regular 401(k) plan, a Solo 401K plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees and are not employed by any business owned by them or their spouse (an exception applies if your full-time employee is your spouse). The business owner and their spouse are technically considered “owner-employees” rather than “employees”.

The following types of employees may be generally excluded from coverage:

  • Employees under 21 years of age
  • Employees that work less than a 1000 hours annually
  • Union employees
  • Nonresident alien employees

If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up. However, a Solo 401k eligible business can have part time employees and independent contractors.

Please contact one of our 401(k) Experts at 800-472-0646 for more information.

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May 26

Are You Eligible to Contribute to a Solo 401(k)?

A Solo 401(k) plan is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. A Solo 401K plan is perfect for any sole proprietor, consultant, or independent contractor.

To be eligible to benefit from the Solo 401(k) Plan, investors must meet just two eligibility requirements:

(i) The presence of self employment activity.

(ii) The absence of full-time employees.

The Presence of Self Employment Activity

Self employment activity generally includes ownership and operation of a sole proprietorship, Limited Liability Company (LLC), C Corporation, S Corporation, and Limited Partnership where the business intends to generate revenue for profit and make significant contributions to the plan.

Are You Eligible to Contribute to a Solo 401(k)?Generate Revenue for Profit

There are no established thresholds for how much profit the business must generate, how much money must be contributed to the plan, or how soon profits and contributions must happen. It is generally believed that the IRS will consider you eligible if the business being conducted is a legitimate business that is run with the intention of generating profits. The self employment activity can be part time, and it can be ancillary to full time employment elsewhere. A person can even participate in an employer’s 401(k) plan in tandem with their own Roth 401(k). In such a case, the employee elective deferrals from both plans are subject to the single contribution limit.

The Absence of Full-Time Employees

Unlike a regular 401(k) plan, a solo 401(k) plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees and are not employed by any business owned by them or their spouse (an exception applies if your full-time employee is your spouse). The business owner and their spouse are technically considered “owner-employees” rather than “employees”.

The following types of employees may be generally excluded from coverage:

  • Employees under 21 years of age
  • Employees that work less than a 1000 hours annually
  • Union employees
  • Nonresident alien employees

If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up.  However, a Solo 401K eligible business can have part time employees and independent contractors.

Please contact one of our Solo 401k Experts at 800-472-0646 for more information.

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Feb 20

Eligibility Rules for a Solo 401(k)

A Solo 401(k) plan is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. A Solo 401K plan is perfect for any sole proprietor, consultant, or independent contractor.

To be eligible to benefit from the Solo 401(k) Plan, investors must meet just two eligibility requirements:

(i) The presence of self employment activity.

(ii) The absence of full-time employees.

Eligibility Rules for a Solo 401(k)The Presence of Self Employment Activity

Self employment activity generally includes ownership and operation of a sole proprietorship, Limited Liability Company (LLC), C Corporation, S Corporation, and Limited Partnership where the business intends to generate revenue for profit and make significant contributions to the plan.

Generate Revenue for Profit

There are no established thresholds for how much profit the business must generate, how much money must be contributed to the plan, or how soon profits and contributions must happen. It is generally believed that the IRS will consider you eligible if the business being conducted is a legitimate business that is run with the intention of generating profits. The self employment activity can be part time, and it can be ancillary to full time employment elsewhere. A person can even participate in an employer’s 401(k) plan in tandem with their own Roth 401(k). In such a case, the employee elective deferrals from both plans are subject to the single contribution limit.

The Absence of Full-Time Employees

Unlike a regular 401(k) plan, a solo 401(k) plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees and are not employed by any business owned by them or their spouse (an exception applies if your full-time employee is your spouse). The business owner and their spouse are technically considered “owner-employees” rather than “employees”.

The following types of employees may be generally excluded from coverage:

  • Employees under 21 years of age
  • Employees that work less than a 1000 hours annually
  • Union employees
  • Nonresident alien employees

If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up.  However, a Solo 401K eligible business can have part time employees and independent contractors.

Please contact one of our Solo 401k Experts at 800-472-0646 for more information.

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May 02

Eligibility Rules for a Solo 401k

A Solo 401(k) plan is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. A Solo 401K plan is perfect for any sole proprietor, consultant, or independent contractor.

To be eligible to benefit from the Solo 401(k) Plan, investors must meet just two eligibility requirements:

(i) The presence of self employment activity.

(ii) The absence of full-time employees.

A Solo 401K plan is perfect for any sole proprietor, consultant, or independent contractor.The Presence of Self Employment Activity

Self employment activity generally includes ownership and operation of a sole proprietorship, Limited Liability Company (LLC), C Corporation, S Corporation, and Limited Partnership where the business intends to generate revenue for profit and make significant contributions to the plan.

Generate Revenue for Profit

There are no established thresholds for how much profit the business must generate, how much money must be contributed to the plan, or how soon profits and contributions must happen. It is generally believed that the IRS will consider you eligible if the business being conducted is a legitimate business that is run with the intention of generating profits. The self employment activity can be part time, and it can be ancillary to full time employment elsewhere. A person can even participate in an employer’s 401(k) plan in tandem with their own Roth 401(k). In such a case, the employee elective deferrals from both plans are subject to the single contribution limit.

The Absence of Full-Time Employees

Unlike a regular 401(k) plan, a solo 401(k) plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees and are not employed by any business owned by them or their spouse (an exception applies if your full-time employee is your spouse). The business owner and their spouse are technically considered “owner-employees” rather than “employees”.

The following types of employees may be generally excluded from coverage:

  • Employees under 21 years of age
  • Employees that work less than a 1000 hours annually
  • Union employees
  • Nonresident alien employees

If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up.  However, a Solo 401K eligible business can have part time employees and independent contractors.

Please contact one of our Solo 401k Experts at 800-472-0646 for more information.

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Jan 09

Who Can Open & Fund a Solo 401k?

A Solo 401(k) plan is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. A Solo 401K plan is perfect for any sole proprietor, consultant, or independent contractor.

To be eligible to benefit from the Solo 401(k) Plan, investors must meet just two eligibility requirements:

(i) The presence of self employment activity.

(ii) The absence of full-time employees.

The Presence of Self Employment Activity

Self employment activity generally includes ownership and operation of a sole proprietorship, Limited Liability Company (LLC), C Corporation, S Corporation, and Limited Partnership where the business intends to generate revenue for profit and make significant contributions to the plan.

Generate Revenue for Profit

There are no established thresholds for how much profit the business must generate, how much money must be contributed to the plan, or how soon profits and contributions must happen. It is generally believed that the IRS will consider you eligible if the business being conducted is a legitimate business that is run with the intention of generating profits. The self employment activity can be part time, and it can be ancillary to full time employment elsewhere. A person can even participate in an employer’s 401(k) plan in tandem with their own Roth 401(k). In such a case, the employee elective deferrals from both plans are subject to the single contribution limit.

The Absence of Full-Time Employees

Are you eligible for a Solo 401(k) plan?Unlike a regular 401(k) plan, a solo 401(k) plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees and are not employed by any business owned by them or their spouse (an exception applies if your full-time employee is your spouse). The business owner and their spouse are technically considered “owner-employees” rather than “employees”.

The following types of employees may be generally excluded from coverage:

  • Employees under 21 years of age
  • Employees that work less than a 1000 hours annually
  • Union employees
  • Nonresident alien employees

If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up.  However, a Solo 401K eligible business can have part time employees and independent contractors.

Please contact one of our Solo 401k Experts from the IRA Financial Group at 800-472-0646 for more information.