Description and Who is Eligible

Specifically designed for self-employed people and small business owners who typically employ fewer than 25 employees.

Eligibility
Self-employed individual or small business owner, including those with employees.

Designed for small businesses with 100 or fewer employees. The plan is funded by employer contributions and can also be funded by elective employee salary deferral.

Eligibility Businesses with 100 or less employees who do not currently maintain any other retirement plan.

Created in 2002 to enable sole proprietors to set up and contribute to a plan offering the same benefits as the conventional 401(k).

Eligibility
Self-employed individual or business owner with no employees other than a spouse.

A savings plan offered to employees that allows them to set aside tax-deferred income for retirement up to $16,500 annually or $22,000 if age 50+.

Minimum Coverage

Plan must cover all employees who earn at least $450, are at least 21 years of age and have worked for employer in 3 of the last 5 years.

Plan must cover all employees who earn at least $5,000 in the current year and have received at least $5,000 during any two preceding years.

Plan can only cover sole-proprietor and spouse.

As a general rule, the plan must be offered to any employee that is age 21 and completes one year of service.

Employer Contributions

Required uniform % of each employee's pay (0-25%).

Employer is required to make either an annual matching contribution between 1% and 3% or an annual non-elective contribution of 2% of compensation.

Two components comprise the maximum Individual(k) contribution: 1.) An employee salary deferral contribution. 2.) An employer profit sharing contribution.

Depending on the terms of the plan, the contribution is allocated based on compensation, years of service, age, or matching basis with employee contributions or some combination of all of these.

Employee Contributions

Not Permitted

Up to $11,500 in 2009. (If age 50+, $14,000.)

$16,500 ($22,000 if 50+)

$16,500 ($22,000 if 50+)

Maximum Annual Contributions

25%, up to a maximum of $49,000 for 2009.

Maximum employee contribution of $11,500 in 2009 (If age 50+, $14,000.) Employer matches up to 3% of salary.

$16,500 ($22,000 if 50+) and 0 - 25% of salary, up to a maximum of $46,000 for 2009 ($51,000 if 50+).

$16,500 ($22,000 if 50+)

Maximum Deductions

25% of participant's total compensation, excluding SEP contributions.

Same as maximum contribution.

Same as maximum contribution.

Same as maximum contribution.

Deadline for Plan Establishment

Any time up to date of employer's return (including extensions).

Any time between 1/1 and 10/1 of the calendar year. For a new employer beginning after 10/1, as soon as administratively feasible. Entries established during the year have until 12/31.

The deadline for establishing a Solo 401 (k) and to make an employee salary deferral election is the last day of your business’ tax year. The deadline for funding the profit sharing part is your business tax return due date, including extensions

The deadline for establishing a 401 (k) and to make an employee salary deferral election is the last day of your business’ tax year.

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