The History of the Solo 401k & Other Retirement Plans
The Solo 401k’s history dates back many years. The plan (also known as Individual K or Owner-Only 401k) is not new. As a retirement solution for self-employed business owners, the Solo 401k enjoys a long history, similar to other retirement plans.
A brief timeline of retirement plan history
- 1875 – The American Express Company establishes the first corporate retirement plan
- 1935 – FDR drafts the Social Security Act, creating the first government-sponsored retirement plan
- 1939 – The Internal Revenue Code includes Section 401a, outlining rules and requirements for 401 retirement plans
- 1974 – The US Congress passes the Employment Retirement Income Security Act (ERISA), setting minimum standards for private industry retirement plans. This act created the IRA.
- 1978 – The US Congress passes the Tax Reform Act, expanding Section 401. The section includes “k”- allowing employees to defer compensation towards their retirement.
- 1981 – The first 401k plan was drafted
- 2001 – The US Congress passes Economic Growth and Tax Relief Reconciliation Act (EGTRRA), allowing self-employed to utilize the 401k. The Solo 401k Plan was born.
Comparing the Solo 401k with other plans
The Solo 401k plan rules are the same as all 401ks. The plan simply covers only the owner of a small business or a self-employed person. A spouse can also qualify for the Solo 401k or Individual k if he or she also works in the business.
The Solo 401k plan is singular in its benefits. Some of these benefits include: high contribution limits, unlimited investment capabilities, checkbook control, and a loan feature. Throughout the Solo 401k’s history, the plan has helped many self-employed business owners reach financial security in their retirement.
A recent event in Solo 401k history is the IRS increasing the contribution limit in 2013. Plan participants can now make a maximum annual contribution of up to $56,500 if age 50 and over, or $51,000 if under the age of 50.
The long history and rich benefits of the Solo 401k plan make it a great choice for the self-employed and small business owners.