Rich Carreiro wrote:
- quote -

http://401kcenter.com/solo-401k.htm

http://www.julyservices.com/solo401keligible.aspx

http://invest-faq.com/articles/ret-plan-401k.solo.html

Milt Baker CPA

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<cpabakem01[at]yahoo.com> wrote:

- quote -

Well, yes and no. If an employee is contributing the
maximum ($15K or $20K depending on age) to an
employer-sponsored plan, but the employer is not
contributing $29K (to reach the personal limit of
$44K/$49K), then there is still a reason for the
self-employed to open an employer plan. That is, to add
more from the employER side.

But if all one is going to do is add employer contributions
and not employee contributions, a SEP-IRA will work as well,
and has less paperwork. Since I have maxed out my 401(k)
contribution with my (former) employer, that's what I will
do this year. Next year, I open the Roth 401(k).

Mark Freeland
BnetOnewX[at]sbcglobal.net

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cpabakem01[at]yahoo.com writes:

- quote -

True -- but I was wondering about what makes you eligible
to open snd maintain a solo 401k as a sole proprietor.
Is filing a Sched C for a legit business good enough?
Does the business have to stay in operation to be able
to maintain the plan, etc.?

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Rich Carreiro wrote:

- quote -

I am not aware of any requirements to open a solo 401k that
involve subsequent years (the examples you gave). There is
a filing requirement for a Form 5500(-EZ) if plan assets
exceed a certain amount or in the year of final distribution
of all plan assets. If the taxpayer hires employees, things
change.

-Mark Bole

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Rich Carreiro wrote:

- quote -

There are two natural markets for the single-participant
401(k). The first includes independent contractors, sole
proprietors, and owner-only C or S corporations. The second
market is those who have dual incomes. They are W-2 wage
earners as employees of a company that offers a 401(k) plan
who also have consulting income from corporate directorships
or freelance work that requires them to file a Schedule C as
a sole proprietor. These are the kinds of taxpayers who
should be interested in the single-participant 401(k)
arrangement because these dual earners traditionally are
looking for a way to shelter additional retirement money.

If, during the year an employee is already contributing the
maximum to a 401(k) or 403(b) plan at work, then the
benefits of establishing a single-participant 401(k) plan
would disappear.

Milt Baker CPA

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What exactly are the eligibility requirements for a sole
proprietor to open and maintain a solo 401(k) plan? In
reading the materials that brokers, etc. have about these
plans, they don't actually give any eligibility criteria.

For example, let's say you have some self-employment income
this year (moonlighting, or did some consulting between
regular jobs) but know/figure that you won't have any SE
income again for the forseeable future. Are you allowed to
open a solo 401(k)? Are you allowed to maintain it even
though there aren't going to be any future contributions?

Similarly, what if you intend your business to be ongoing,
and you have a some profit this year, but losses the next
couple of years and then you give up on the business.
Presumably you can open it (you had profits this year), but
can you maintain it? Even after you stopped the business?

And are there any minimum income requirements? If someone
has a steady, legitimate $1000/yr of SE income (cuts lawns,
babysits, etc), can they open and maintain a solo 401(k)?

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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