Can I Still Have a Solo 401k Even if I Have Employees?

It depends. Many people assume that they can only have a solo 401k if they have no employees. If a spouse is employed by the business, then he or she can also be included in a solo 401k plan. A business owner and spouse would be considered “owner-employees” rather than just “employees”.

The solo 401k plan would be restricted from employing any full-time employees. A full time employee is defined as an employee who works at least 1,000 hours per year.  So a company can employ unlimited part time employees who work less than 1,000 hours a year and still be allowed to utilize a solo 401k.

Since there are no employees who would have qualified to receive benefits, the business doesn’t need to perform any nondiscrimination testing for the plan.  Should the company hire full time employees, this advantage would go away. At that point, the solo 401k would then have to convert to another retirement plan, which would typically be a safe harbor 401k.

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