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What is a One-Participant 401(k) Plan?

An individual retirement plan that has been referred to by many names including: Self-Employed 401(k), Individual 401(k), Owner Only 401(k) Plans, Solo 401(k), Solo-k, Uni-k, One-participant k and likely a few more names along the way!

 

What are the benefits of investing in One-Participant 401(k) Retirement Plans?   

A great option for the small business owner with no employees, or the business owner and his or her spouse! One-Participant 401(k) Plans have similar characteristics as a sole proprietor Profit Sharing Plan and they are actually traditional 401(k)s with the same rules and requirements as any other 401(k) plan.

One-Participant 401(k) Plans have become a popular alternative to the SEP IRA due to the fact that they allow individuals to save much more money for retirement! Because the self employed individual plays the role of both the employer and the employee, he or she can make contributions in both capacities! 

The business owner can actually contribute both:

  • Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit; plus

  • Employer non-elective contributions

In addition, these plans offer flexible contributions, the ability to take loans and the added benefit of low cost setup. Please view the chart below for more info.

If you are self-employed you may want to consider a One-Participant 401(k) Plan to help meet your retirement plan goals. Give us a call today to see how we may help you meet your retirement savings goals!  

One-Participant 401(k) Plans

 

Who is eligible?

Self-Employed individuals, owner-only (as well as the owner's spouse) businesses and partnerships

Tax Benefits

Tax-deferred growth, tax-deductible contributions, and pre-tax deferral contributions

Maximum compensation

$265,000 in 2016 and $270,000 in 2017 

This is the Maximum Earned Income amount that contributions (salary deferrals) can be based on

Maximum Contribution

 

Salary deferrals up to:

 
           
 

Year

Under 50 Years Old

 

50 + Years Old

 
           
 

2016

$18,000 +

 

$24,000 +

 
           
 

2017

$18,000 +

 

$24,000 +

 
           

 

Plus Employer non-elective contributions

Total Contribution cannot exceed $53,000 for 2016 and $54,000 for 2017.*

*Not counting catch-up contributions for those age 50 and over

 

Profit Sharing Contribution

Employer/employee can defer up to the lesser of 100% of participant’s annual compensation or:

$543,000 in 2016. (Unless over 50; then $58,000 see Catch-up Contributions)

$54,000 in 2017 (Unless over 50; then $59,000 see Catch-up Contributions)

Maximum participant and employer contributions combined. (You CANNOT exceed this amount!)

Catch Up Contributions*

Salary deferrals up to $5,000 for 2013 allowing a maximum annual deferral of $23,000 $53,000 for 2016 and $54,000 for 2017.

Withdrawals

Must begin by age 70 1/2, 10% Penalty for early withdrawal (Before age 59 1/2), No exceptions allowed

Administrative Filing Requirements

Must file an Annual Form 5500 after plan assets exceed $250,000

Deadline to Establish Plan

December 31st or your firm's fiscal year end

Solo 401(k)

Fees

Place Trade does not charge any inactivity fees, maintenance fees, set-up fees annual fees. However, Place Trade offers qualified plans in different formats and with a variety of different custodians.  

Please keep in mind that every plan is different.  Potential fees that may be charged by a custodian depend on the specific;

    • type of plan that you hold

    • type of account that it is held in (for example, whether it is held in a brokerage or investment company account) 

    • custodian that is holding your account  

 

Learn more about Individual 401(k) Plans by visiting the official IRS website and please speak with your tax and/or legal advisor before making any tax or investment related decisions.

IRS Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. 

  

Get more info on Retirement Planning for Large and Small Businesses:

Qualified Plans             

SEP IRAs

SIMPLE IRAs

Qualified Plans: One-Participant 401(k) Plans

Qualified Profit Sharing Plans & Qualified  Money Purchase Plans

Retirement Plan Rollover Chart

Rollover Your 401(k)

Retirement Planning    

Tax Reporting

 

Learn more about the different Retirement Accounts offered at Place Trade by calling 1-800-50-PLACE or 1-919-719-7200 today!

  
 
   

Get more info on Retirement Planning for Large and Small Businesses:

Qualified Plans     SEP IRAs     SIMPLE IRAs     Qualified Plans: One-Participant 401(k) Plans     Qualified Profit Sharing Plans & Qualified  Money Purchase Plans     Retirement Plan Rollover Chart     Rollover Your 401(k)     Retirement Planning     Tax Reporting

View the General Characteristics of Qualified Profit Sharing Plans & Qualified Money Purchase Plans

Self-Employed 401(k) - Individual 401(k) - Owner Only 401(k) Plans

 

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Learn more about retirement planning by visiting some of the links below:

Roth IRA

SEP IRA

SIMPLE IRA

Traditional IRA

Qualified Plans

Rollover IRAs

Find out how Place Trade can help you get the most out of your college planning by visiting some of the links below:


Coverdell ESA

529 College Savings Plans

UGMA/UTMA Accounts