Solo 401k rules for eligibility are simple. Not sure if you qualify? Read on to find out if the Solo 401k is right for you.
Established by the IRS in 1981, the Individual k or Solo 401k plan is a traditional 401k that is simplified for the self-employed and small business owner. The Solo 401k is still a 401k; the basic rules are the same. However, the plan offers additional options and advantages to its participants. Its loan feature, ease of administration, checkbook control, and high contribution limits make it a powerful retirement vehicle. And those who wish to take advantage of these benefits may be surprised by the simple requirements for eligibility.
Solo 401k rules for eligibility
In order to qualify, an individual must meet the following two requirements:
- The presence of self-employment activity
- The absence of full-time employees
Self-employment may occur on a full-time or part-time basis. You can qualify for the plan even if you have part-time self-employment in conjunction with full-time employment elsewhere. A side business can qualify for the Solo 401k. This is perfect for independent contractors, real estate professionals, and consultants.
You cannot have full-time employees in order to qualify. The IRS defines full-time employees as those working over 1,000 hours per year. This does not include you or your spouse, if you are both employed by the business.
Your spouse can qualify for the plan if employed by the business. The IRS counts the spouse as an owner-employee. He/she can participate and contribute to the Solo 401k plan as well.
Setting up the plan
Sense Financial Services is able to set up the Solo 401k plan with expertise and experience. As California’s leading provider of self-directed retirement accounts like the Solo 401k, Sense Financial has assisted hundreds of clients in setting up their retirement plans. The plan is structured to be simple to administrate and use for investing. As a self-directed plan, the Solo 401k can invest in a wide array of options, from real estate to traditional stocks and mutual funds.
Contact us to find out if you meet the Solo 401k rules for eligibility at (949)228-9394.