Owner Only (Individual) (k)
(Owner Only Businesses)
An Owner Only plan is for a small business owner with no common law employees or with common-law employees who may be excluded (e.g., part-time or seasonal employees working less than 1,000 hours per year). Owners (and, if applicable, their spouses) are covered under the plan.
Any business owner with no employees other than co-owners or spouses can establish an Owner Only 401k plan. It does not matter if they are a startup or been in business for years. They may work as an independent contractor with 1099 income, freelancer, sole proprietor, or in partnership, Limited Liability Company (LLC), or corporation.
Small business owners can establish an Owner Only plan and transfer their IRA, 401k, 403b, or other qualified retirement funds into this new retirement plan. Once the funds are in the plan, owners can borrow 50% of their 401k account balance up to $50,000 tax-free and penalty free provided they pay back the loan.
Owners can make tax-deductible contributions to these plans at levels more generous than other retirement plans such as the SEP and SIMPLE plans.
Owner Only plans are much simpler to administer (no nondiscrimination testing required since all participants are owners). Although annual reporting are still required, most of the time they are simpler and easier to prepare.