What is a Solo 401(k) Plan?
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
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.
Long-Term, Part-Time (LTPT) Employees
Long-Term, Part-Time (LTPT) employees are a category of eligible participants introduced by the SECURE Act of 2019 and expanded by SECURE 2.0, aimed at increasing retirement plan access for part-time workers who historically have been excluded from 401(k) plans. Under these rules, beginning in 2024, employees who work at least 500 hours in 3 consecutive 12-month periods (reduced to 2 consecutive years starting in 2025 under SECURE 2.0) must be allowed to make elective deferrals into the employer’s 401(k) plan, even if they don’t meet the traditional eligibility requirement of 1,000 hours in a single year.
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.)