Most people who want to invest their hard earned money on lucrative financial investments are asking if it is possible to have both individual 401 k loan and continue an employer 401k distribution. The good news is that having the two plans at the same time is definitely possible and allowed. There are no exclusive plan regulations prohibiting a person to have more than one plan, particularly 401k account. The rule states that you can have a solo 401k account and still continue your full-time job and contribute to a 401k plan.
Individual 401 k loan is for the self-employed or those who have small scale businesses. If you are a full-time employee, you can still be eligible for a Solo 401k account. You can still avail the benefits and privileges of both plans for financial growth and to use as an investment fund. How can you be a full-time employee yet still get approved for an individual 401 k loan? Sense Financial LLC, the leading provider of this lucrative and efficient retirement plan explains the basics of 401k online. For instance, they reiterated that as long as an individual has some income derived from qualified self-employment source, his eligibility is approved.
A specific example that states a full-time employee could still have a Solo 401k account is when he has a part-time job on top of his current full-time employment. Thus, if you are working as a full-time employee but still do some extra job on the side such as a consultant, you are still an eligible individual 401 k loan holder. Further, it means you can still contribute to a conventional employer 401k account as well as get a Solo 401k retirement plan based on the eligibility parameters.
An Effect on Tax-deference For a Holder of Individual 401 k Loan and Employer 401k
One downside, however, is that participants who have two or more 401k plans are not allowed tax-deference over their maximum limit on a yearly basis. For 2013, all account holders under 50 years old can defer $51,000 per year while those over 50 years can annually defer a total of $56,500. Furthermore, the new contribution rules for individual 401 k loan states that account holders less than 50 years of age could contribute a maximum amount of $17,500 which could be converted as pre-tax or after-tax. The combined profit sharing contribution for single member LLC or sole proprietorship which includes employee deferral amounts to $51,000 with a $1,000 increase from its 2012 rating.