Is a Solo(k) Plan Right for You?

What you'll find on this page:

Eligibility

The plan is designed for the individual business owner (or self employed), but it is also available to the owner's spouse.

Even if you (and your spouse) are the sole owner(s) of your business, the pension laws may treat it as combined with other commonly-controlled or affiliated businesses. If your business is so combined with another that has other owners or employees, it may not be eligible to adopt the PENSCO Solo(k) plan.

PENSCO Solo(k) may be available to your business even if it has other employees, as long as they are of a type that that the tax laws permit you to exclude from plan participation. Excludable employees generally are those under age 21, or who are not credited with 1,000 hours of service in any year, are union employees or are non-resident aliens with no U.S. income.

If you do not meet the eligibility requirements, you may want to consider a SEP-IRA plan.

Consult a knowledgeable pension professional to determine if these laws apply to you.

Advantages

  • Unlike with Roth IRAs, there are no income limitations related to the ability to contribute to the Solo(k)s Roth (after-tax) deferral component.
  • Also unlike IRAs, you can invest in an S corporation, buy life insurance, and borrow up to $50,000 or 50% of your participant account (whichever is less).
  • Income from leveraged real estate investments may not be subject to UDFI tax.

PENSCO Trust's Solo(k) plan allows individuals to invest in all permitted investments including real estate, S corporations, and many other asset types such as traded stocks and mutual funds.

Contributions

Contributions are discretionary (meaning you don't have to contribute) each year and 100% vested immediately. Like the regular 401k contribution limits for 2010, you can elect to defer up to $16,500 of your pre-tax income. If you are over the age of 50, you can also make the catch up contribution of $5,500, for a total of $22,000. On top of the $16,500, as the employer you can also make a profit sharing contribution up to 25% of your pay (which would be based on your W-2), not to exceed $49,000 for 2010.

Open a Solo(k)

PENSCO will be the custodian of your Solo(k) plan and invest contributions as you direct. PENSCO will also provide you with a complete plan document required by the tax laws and necessary plan adoption, enrollment, deferral election, and beneficiary designation forms. We will also provide you with updates to the plan document as necessary to keep it in compliance with tax law changes.

We've made signing up with PENSCO simple. After confirming that your company is eligible, move on to our step-by-step Solo(k) Action Checklist, contained within our Solo(k) Plan Establishment Kit.

Before you start the account open process, you should confirm that your business is eligible for PENSCO's Solo(k).

  • PENSCO Solo(k) is available to your business if you (or you and your spouse) are its only owner(s) and employee(s).