Solo 401k Plan Facts

First available—made possible by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

Participation—designed exclusively for small business owners and is the retirement plan of choice for owner-only businesses such as sole proprietors, corporations, LPs, and LLCs.

Can Exclude Certain Employees—under federal laws applicable to qualified retirement plans, specific categories of employees may be excluded from participating in a Solo 401k plan, which are:

  Employees under age 21

  Employees working fewer than 1,000 hours in a year

  Nonresident aliens

  Union employees

Effective—designed to maximize 401(k)/profit sharing contributions while being less complex and less costly to maintain than other retirement plans.

Higher Contribution limits—allows for tax deductible contributions of 25% profit-sharing contribution and salary-deferral contribution of $16,500 for maximum amount of $49,000 per participant for tax year 2011.

Roth Contributions—allows for designated Roth contributions, $16,500 for 2011.

Loans/Borrow—resulting from change of IRC Sec. 4975(f) (6), which expanded the loan feature to Solo 401k plans, participants can borrow from Solo 401k.

Transfers/Rollovers—allows for rollovers/transfers from other retirement plans (e.g., 401ks, profit sharing plans, 403(b) s, define benefit plans, 457s and IRAs).

Annual Contributions not required—business owners can contribute in some years but are not required to contribute every year.

Easy to Administer—even though Solo 401k plans are 401(k)-based plans, they are easier to administer because they are not subject to the majority and costly nondiscrimination testing that apply to regular 401(k) plans.

Form 5500 EZ—annual return for one-participant (owners and their spouses) Solo 401k plans, and only required when plan balance reaches $250k or more, or when plan is terminated.

Plan Trust Document—in order to establish a Solo 401k plan, the employer is required to fill out and sign a written, plan trust document that has been approved by the IRS.