Self-Directed Solo 401k Eligibility Checklist

While a solo 401k is not a new type of 401k plan but rater a 401k for the self-employed, confusion often arises regrading qualifying to open a solo 401k plan. A solo 401k is for owner-only businesses with not full-time W-2 employees. For a example, a business where both spouses work for the business that does not employ full-time W-2 employees can adopt a solo 401k plan and both spouses can participate in the plan. Please see the following checklist for more on the solo 401k eligibility requirements.

Does Son Impact Eligibility QUESTION

I own a business and my son is a non-owner full time employee. Can I still open a solo 401k for both of us? Or just me?

Unless your son is under age 21you won’t be able to open a solo 401k plan because he is a full-time employee (i.e., he works over 1,000 or more hours per year) in your business. 
The solo 401k rules allow for the exclusion of W-2 employees under age 21 regardless if they work 1,000 or more hours per year in the business. You also have to consider if you own any other businesses that may employ full-time W-2 employees as it may impact the controlled group rules. Lastly, he would need to be BOTH an owner and an employee in the business in order to also be eligible to participate in the solo 401k plan.

EIN for Solo 401k QUESTION

Your process for setup indicates that the plan has its own EIN. Is this correct? Is it a separate business?

The solo 401k is a retirement trust so the IRS requires its own EIN.


SOLO 401(K)