Solo 401k Rules are important to understand. The self-directed Solo 401k retirement plan offers many options and advantages to its participants. Established by the IRS in 1981, the Individual k or Solo 401k plan is a traditional 401k simplified for the self-employed and small business owner. As a 401k, the solo 401k rules are the same. However, the plan offers additional options such as a loan feature, ease of administration, checkbook control, and high contribution limits. Those who wish to take advantage of these benefits may be surprised by the simple requirements for eligibility.
Solo 401k rules
The Solo 401k rules for eligibility are simple. 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. Solo 401k rules allow for part-time self-employment, even in conjunction with full-time employment elsewhere. In other words, a side business can qualify for the Solo 401k. The plan is perfect for independent contractors, real estate professionals, and consultants.
The absence of full-time employees is a second requirement of the plan. The IRS defines full-time employees as those working over 1,000 hours per year.
The only exception to this rule is the spouse. The spouse of the business owner can qualify for the plan if involved in the business full-time, and as an owner-employee, he or she can participate and contribute to the Solo 401k plan as well.
Setting up the plan
The plan offers its owners ease of administration, but must first be set up by one knowledgeable of the requirements and paperwork associated with 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. Their service includes adoption and establishment of the plan as well transfer of existing accounts to the plan.
Those who meet the Solo 401k rules for eligibility and are interested in the plan and its benefits may contact (949)228-9394.