Self Directed Solo 401k Eligibility: Full-Time Employee
The Solo 401k plan offers many flexibility and control. Comparing to a traditional IRA, the plan allows a much higher contribution limit and the ability to borrow from the plan. The Solo 401k, however, is not for everyone. The self directed Solo 401k eligibility requirement makes it available only to self-employed individuals and business owners without full-time employees.
While many people understand that the restriction to full-time employee applies to the Solo 401k sponsoring business, this is not the entire picture. What if someone owns two businesses, one with full-time employees and one without? Can this business owner still set up a Solo 401k for his business without full-time employee?
Sense Financial discusses this requirement in details in this latest Solo 401k Quick Tip:
Self Directed Solo 401k Eligibility: Full-Time Employee
Solo 401k rules state that if a person owns another business with full-time employees, even if it’s not the business adopting the plan, that person is not eligible to set up a Solo 401k. If you are only a minority owner or shareholder, with no controlling interest of a corporation, however, this rule does not apply. That means, if you own shares of a corporation that has full-time employees, but have no controlling interest, you can still qualify for a Solo401k plan.