A Solo 401(k) often used in combination with a Defined Benefit plan
This plan is a good option for self-employed owner-only companies, or an owner and spouse if they need the flexibility of making optional contributions each year. These plans may be used in combination with a Defined Benefit plan to increase contribution amounts and flexibility of the DB plan.
CALCULATE HOW MUCH YOU COULD CONTRIBUTEHow It Works
A OnePerson(k) is a retirement savings plan specifically designed for self- employed business owners (including sole proprietorships, corporations, and limited liability corporations). Typically, it allows for higher contributions than a SEP or SIMPLE plan while providing the same tax benefits of a regular 401(k) without the high costs and standard employer/employee structure. The plan combines the features of a 401(k) plan and a Profit Sharing plan.
- These plans allow the business owner and spouse to make discretionary profit sharing contributions up to 25% of compensation.
- In addition, each participant may make salary deferrals to the OnePerson(k) that equal the lesser of 100% of compensation or $19,500.
- For 2021, the aggregate contribution limit for the profit-sharing contribution and the elective deferrals cannot exceed the lessor of 100% of compensation or $58,000 (plus an additional $6,500 in “catch-up” contributions if age 50 or over).
Once the plan is established, the business owner can open a Trust investment account at any financial institution and select any marketable investments.
The OnePerson(k) should be set up by December 31 and at the latest by the business’ tax filing deadline including extensions for the plan year.
Combining a OnePerson (k) with a Defined Benefit Plan
Adding a 401(k) to a traditional Defined Benefit plan allows the owner to:
- Maximize deductible retirement contributions — the largest contribution of any qualified plan
- Increase flexibility — Because the 401(k) contribution is not required each year, the business owner will only contribute in higher income years thus increasing control over total annual contributions. This is an advantage for clients whose income fluctuates from year to year.
When adding a 401(k) to a Defined Benefit plan, the 401(k) contribution is limited to salary deferrals and employer contributions of not more than 6.0% unless the plan is covered by the Pension Benefit Guarantee Corporation (PBGC).
Getting Started
Please note these plans should be opened by December 31 and at the latest by the business’ tax filing deadline including extensions for the plan year.
Are you Eligible?
- Individual business owner or
- business owner and spouse
- no non-family employees
Call 866-269-2706 to talk to a consultant