Plan description
The Invesco Solo 401(k) is a 401(k) plan for owner-only businesses - those with no employees other than the owner's spouse and no plans to add employees in the near future.
Key features
- Both salary deferrals and profit sharing contributions are discretionary - you do not have to make them each year.
- Rollovers from other eligible plans, including traditional IRAs, are permitted - giving you an opportunity to consolidate your retirement assets.
- Profit sharing contributions and traditional salary deferrals are tax deductible, and earnings accumulate on a tax-deferred basis. Keep in mind, however, that any withdrawals made prior to 59 1/2 may be subject to tax penalties.
- Loans are available.
- Costs for an Invesco Solo 401(k) are substantially less than those of a standard 401(k).
- Designated Roth contributions - called a Roth 401(k) - offer tax-free earnings growth for all investors and tax-free distributions for those 59 1/2 or older or who meet the specified criteria.
Who can establish
Businesses with no employees other than the owners and their spouses. If you have employees or anticipate hiring employees in the near future, this plan isn't appropriate for you.
Annual contributions
Please see Retirement Plan Limits for the current compensation and contribution limits for this plan.
Rollover contributions
Rollovers from other eligible plans are permitted.
Vesting
You are 100% vested immediately.
Loans
Loans are available. Generally, you may borrow up to one-half of your vested account balance, but no more than $50,000.
Withdrawals
Distributions are limited to the terms of the plan. In-service withdrawals are available. Minimum distributions are required for owners 70½ or older. Distributions that are not qualified Roth distributions are subject to income tax in the year withdrawn and a 10% early withdrawal penalty if withdrawn prior to 59 1/2.1
Deadline to establish
The plan must be established by the employer's tax year end.
- The plan document must be signed and effective before contributions are made.
- Only compensation earned after the adoption agreement is signed may be deferred.
Discrimination testing
401(k) discrimination (ADP) and top-heavy tests aren't required.
Government reporting
You may be required to file IRS Form 5500 annually.
As a result of the 2006 Pension Protection Act, for plan years after 2006, one-participant plans with total plan assets of $250,000 or less are exempt from filing Form 5500-EZ.
Trustee
You (the business owner) will serve as trustee of the plan.
Invesco Solo 401(k)® Self-Service
- Self-Service
The self-service option doesn't offer administrative or compliance support. The owner is responsible for the administrative, compliance and reporting duties related to the plan.
