Solo 401k IRS Rules | Solo 401k ERISA Rules

Solo 401k is a qualified plan that has been approved by the IRS for the self-employed, those with no full time employees besides spouse or business partner.  Solo 401k is for maximum of two participants. While traditional 401k has been in existence since passage of ERISA in 1974,   Solo 401k Plan, a type of 401k, became popular in 2002 with the passage of EGTRRA tax law. EGTRRA primarily affected Solo 401k in that higher contributions were allowed stemming with change in how salary deferral contributions were calculated. The result was higher contributions to Solo 401k when compared to other retirement plans for the self employed, such as SEP and SIMPLR IRAs.

Just like other retirement plans for the owner-only business owner (e.g., SEP and SIMPLE IRAs) that allow for an array of investments, Solo 401k  can also invest in a wide variety of investments such as real estate, tax liens, trust deeds, precious metals, and much more, but certain IRS rules have to be adhered to.  These rules are referred to as “Prohibited Transactions” and are found both under the IRS Code as well as ERISA.  Visit following links before you proceed to Open Solo 401k to learn more about prohibited transactions as the consequences for Solo 401k engaging in prohibited transaction can result in the entire solo 401k balance being subject to immediate taxes and penalties.

The Prohibited Transaction Rules are found both in the Internal Revenue Code and ERISA

Prohibited Transactions under ERISA:

Prohibited Transactions under IRC:

Plan Participants-General Distribution Rules,-Employee/401%28k%29-Resource-Guide—Plan-Participants—General-Distribution-Rules


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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