Passive Dormant Company Solo 401k Plan

QUESTION: Can one still have a dormant/passive company in order to keep the solo 401k account open?

ANSWER: No I do not recommend having a dormant company for the purpose of keeping a solo 401k open. Reason being, 401k plans are for active companies not dormant companies. This is why it is important to open a solo 401k with the intention that it will be a permanent arrangement. Therefore, if your intention is to no longer be self-employed within a few years, the likelihood of running afoul with the plan 401k permanency rules are high.  In order to avoid running afoul with the plan permanency requirements, the reason for closing the self-employed business must have been unforeseeable when the solo 401k plan was opened.  For more on the plan termination rules, click here.

Thank you,

Jane in Maryland

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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