IRS Lists Solo 401k Plans as Audit Target - If your business sponsors a "solo 401k" plan, it may be in the crosshairs of the Internal Revenue Service. The Service's TE/GE division has identified one-participant 401k plans as among its current audit initiatives. In its web posting announcing the initiative, TE/GE states: "[t]he focus of this strategy is to review one-participant 401k plans to determine if there are operational or qualification failures, income and excise tax adjustments, or plan document violations."
IRS Posts Small Business Retirement Plan Publication - The IRS has posted the 2020 tax year version of Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). It is useful to employers that are considering establishing a retirement plan, as it describes operational requirements, contribution opportunities, etc., of the different plan types.
The Solo 401k: A Retirement Plan for the Self-Employed Person - The Solo 401k is designed to solve a very particular problem. What if you work for yourself instead of for another employer? How can you start saving for retirement responsibly and in a tax-advantageous way? This retirement plan allows self-employed people and solopreneurs to have a retirement account so they can build tax-advantaged savings and sleep easier at night. This article delves into what a solo 401k is, who is eligible to participate in it, and how it differs from a traditional 401k plan.
SEP IRA vs Solo 401k: Which Should You Choose? - Working for yourself doesn't mean you have to miss out on the tax benefits that regular employees get from standard workplace retirement plans, though. You have two excellent options: SEP IRAs and Solo 401k plans. Both offer similar benefits, but their few key differences may make one better for you.
A glossary retirement plan and investment terms available here.
401k Plans for Sole Proprietorships
Regulatory reform now allows Sole Proprietorships to set-up and contribute to a 401k plan. These are often called Solo 401k or Individual(k) plans. A number of vendors are beginning to market specific plans to meet this need.
General Features of a Solo 401k Plan:
||Sole proprietors with no additional employees other than the spouse of the proprietor or partnerships whose only employees are self-employed partners and their spouses.
|Trustee and Plan Administrator
||Business Owner, Spouse or Partner or any combination, or any other designated third party.
|Up to $19,500 (not to exceed 100% of pay and no more than $285,000 of pay can be taken into account). Total salary deferral and employer maximum is $57,000.
|Individuals age 50 or older may contribute an additional $6,500 in salary deferrals beyond the $19,500 which does not count towards the maximum total contribution limit of $57,000.
||Up to 25% of pay (20% for self-employed) to a maximum of $57,000. Salary deferral contributions are also counted towards this limit.
||Rollovers and transfers allowed from traditional IRA, SEP, Qualified Plans or Keoghs (Profit Sharing, Money Purchase Pension, Defined Benefit), 401k, 403(b) and governmental 457 plans. SIMPLE IRAs are eligible for rollover after two year holding period is met.
||Available to all participants, including unincorporated business owners.
401k plans are subject to numerous and complex rules, regulations and tax qualification requirements. Be sure to consult with a qualified professional before making any decisions.
Information on Small Business Plans
Starting a small business retirement savings plan can be easier than you think. Here are some resources on a varity of retirement plans available to the small business person.
Small Business Retirement Plan Options - 2020 -- This chart compares 4 common types of plan designs often utilized by small employers.
DOL's 401k Plans for Small Businesses
Choosing a Retirement Plan for Your Small Business -- In this piece you will find a chart outlining the advantages of each of the most popular types of IRA-based and defined contribution plans and an overview of a defined benefit plan.
Retirement Plans FAQs Regarding SEPs
FAQs Regarding SIMPLE IRA Plans
SEP Retirement Plans for Small Businesses
Simple IRA Plans for Small Businesses