Interested in i401k Services? Is Setting Up an i401k Right For You?
The i401k is also often referred to as:
- Solo 401k
- Individual 401k
- Self Directed 401k
- self employed 401k
- self employment 401k
- Solo K
We’ve created a simple Self-Employed i401k guide to give you the basics of what you need to know about Solo 401ks. Click here to download it for free:
If you are a self-employed business owner, an i401k may be just the right retirement option for you. The i401k or Individual K gives self-employed business owners the same great retirement benefits that large corporations have enjoyed for years. The i401k is significantly less complex than a typical 401k or other profit sharing plans and in many cases, it allows for much greater tax-sheltered contributions than other traditional types of small business retirement plans.
There are many advantages to having an i401k over other small business retirement plans, such as SEPs and SIMPLES. First, the contribution limits can be much higher. As the self-employed business owner, you can set aside up to 25% of your income as a tax-deductible, profit sharing contribution. You can also contribute up to $18,00 for 2017 ($24,000 if you are age 50 or older) as a salary deferral. The maximum contribution for an i401k plan for 2017 is the lesser of $54,000 ($60,000 if age 50 or older), or 100 percent of compensation.
Another advantage to the i401k are the Roth contributions you are eligible to make. You can designate some or all of your deferrals as Roth contributions. Roth contributions are made with after-tax dollars, which allows those contributions to grow tax-free.
i401k Loan To Self Rules
Unlike an IRA, you may take loans from your i401k and most Solo 401k Plans offered by the traditional financial institutions such as Fidelity, Sunwest Trust’s i401k Plan allows plan participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose, including paying credit card bills, mortgage payments, or etc. The main stipulation is the loan has to be paid back over a 5-year period at least quarterly at a minimum prime interest rate (you have the option of selecting a higher interest rate).
Make sure to check with your tax professional to find out the limitations and amounts you can borrow from your i401k plan. The primary stipulation is the loan has to be repaid over a 5-year period at least quarterly at a minimum prime interest rate. Note: You have the option of selecting a higher interest rate. Check with your tax professional to find out the limitations and amounts you can borrow prior to initiating a loan from your i401k plan.
i401k Services Eligibility
To be eligible for an i401k:
- You must be a self-employed business owner with no full-time employees, other than your spouse.
- Employees that work less than 1,000 hours annually.
- Employees under the age of 21.
- Union employees and nonresident alien employees are generally excluded from coverage under your company’s i401k plan.
i401k vs IRA – Lower Administrative Costs
The i401k has low in administrative costs. Unlike a self directed IRA, you are not required to have a custodian for your i401k plan, you may act as trustee for your own plan. You simply open a checking or savings account in the name of your i401k plan trust and work with your tax professional to determine how much you can contribute each year.
You may also choose to not contribute in any year for any reason. The i401k gives you complete flexibility to contribute when you would want.
Filing Form 5500EZ
If your i401k account is under the $250,000 limit, there is no annual reporting required for your Individual 401(k).
However, once your Individual/Solo 401k account accumulates $250,000, you’ll be required to start filing a Form 5500EZ. It’s that straight-forward document and your tax professional should be able to help you prepare it.
If you have any additional questions about i401k plans, call us about our i401k Services and one of our knowledgeable representatives will be delighted to assist you.
i401k Initial Fees And Subsequent Amendment Fees
To set up an i401k with Sunwest Trust, there is a one-time setup fee of $500.00 and an annual fee of $200.00 for subsequent amendments to the 401k plan.
Unlike other i401k services, which nickel and dime you every time an amendment rolls out. To lower your on-going costs, we simply charge a flat annual fee giving all account holders the option to add both non-mandatory and mandatory amendments to their plan as they see fit.
Our annual fee of $200 covers ALL amendments. Individual 401k clients will receive amendments via email and they will have the option to add non-mandatory amendments to their plans. If you choose NOT to add an amendment to your plan, just delete the email. We will notify you when an amendment is mandatory.
Mandatory amendments must be printed out and signed in some cases. Once you print the amendments, add them to your 401k notebook, or simply download the amendment to your 401k USB drive.
Open an i401k with Sunwest Trust: Open an i401k and access our i401K Application
For more information about our i401k services, watch our HOW TO VIDEO.