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Have You Heard The Buzz About Individual 401ks?

Individual 401ks Are Exploding As New Entrepreneurs Emerge From The Workplace

individual 401k

Individual 401k Services for Soloprenuers – Is an Individual 401k Right For You?

What is an Individual 401k?

Solo 401ks, also known as a “Solo K” or “Individual K” is a 401k for owner-only small businesses, which was made possible by legislation passed in 2001.

Why Individual 401k Plans?

401k plans can be a valuable tool in gaining financial security in retirement. They are a great option for companies considering a retirement plan. 401k plans provide the business with higher contribution limits and other unique options that may not be available with other retirement plans.

Who is Eligible for an Individual 401k?

Under the laws and regulations affecting qualified plans, an “owner” includes all owners, as in the case of a partnership where there are two or more owners, as well as spouses of all owners, but no common law employees. Corporations, S-corporations, sole proprietors, partnerships, and LLCs may all set up individual 401k as long as they have no common-law employees, meaning only owners and their spouses work for the company.

Advantages:

  • No nondiscrimination testing
  • High contribution limits
  • Limited plan reporting requirements
  • Plan loans available

Why don’t Individual 401ks require nondiscrimination testing?

Since one of the rules for having an individually-owned 401k is having no common-law employees, it is not possible to discriminate against that group. Therefore, nondiscrimination testing is not required.

Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.