What is a Solo 401(k) Plan?

A solo 401(k) plan is a retirement plan that is offered through an employer. It is the most common kind of defined contribution retirement plan. 401(k) plan is a traditional 401(k) plan that covers business owners and spouses with no eligible employees. A solo 401(k) can be advantageous for these individuals who would like to contribute above the limits of a personal IRA.

Who can have a Solo 401(k)?

Solo 401(k) Plans are typically designed to have the most stringent eligibility requirements to maintain solo status. This means that the plan is designed with the following eligibility requirements for employees to participate:

Age requirement of 21 years
Service requirement of 1,000 hours worked in the first 12 months of employment or any calendar year
Semi-annual (1/1 or 7/1) entry dates, after the above requirements are satisfied.

Contribution Limits and Deadlines

Contributions can be made as:

employee deferrals or employer contributions

Maximum annual deferral contribution:

the lesser of the plan year’s 401(k) elective deferral limit or 100% of compensation

Catch-up deferrals are permitted if:

the owner/employee is age 50 or older anytime in the plan year

Maximum annual employer contribution:

20% of Schedule C / K-1 income or 25% of W-2 Income

See our full Annual Limits Chart for this year's numbers

Contribution Deadlines

In order to deduct a contribution for a given year, it must be deposited by the due date (including extensions) of the company tax return. However, if your business entity is a corporation (C- or S-), 401(k) contributions must be withheld from W-2 wages before the end of the calendar year.

Required Minimum Distributions (RMDs)

You’re required to start taking Required Minimum Distributions (RMDs) from your 401(k) once you reach a certain age, but there are a few exceptions. If you’re still working, you can generally delay RMDs until after you retire—unless you own 5% or more of the business, in which case you must begin RMDs at the required age even if you continue working. Your first RMD can be delayed until April 1st of the year after your “Required Beginning Date” (RBD), but this means you’ll take two RMDs in that year (one for the prior year and one for the current).

Various RMD ages based on dates of birth:

Birth Year	RMD Age
Before July 1, 1949	70 1/2
July 1, 1949 – 1950	72
1951 – 1959	73
1960 or later	75

Plan Implementation

Establish the account(s) at a financial institution to manage the investments and set up an IRS approved plan document.

Ongoing Administration

A Plan Tax Return (Form 5500) is required once combined assets across all plans sponsored by the employer exceed $250,000. As there are no eligible employees, a solo 401(k) is not subject to nondiscrimination testing.

Talk about a Solo 401(k) with RPG

Ask about our Solo 401(k) Monitoring Service!

RPG Consultants offers Plan Document services and the monitoring of Solo 401(k) plans to make certain they are complying with IRS and DOL regulations

Maintain compliance of the Plan Document with restatements and amendments

Monitoring asset levels to determine the filing requirements

Confirming there are no employees or companies that are part of a controlled group/affiliated service group to ensure the Plan remains in compliance

Advising on maximum contributions/ways to increase maximums (adding another Plan)

Distribution consulting as requested (loans, ISDs, 1099s, etc.)

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