Sole Props wanting 401(k) Plans

[Guest Michael S. Ouellette]

Is there anything in current (pre EGTRRA)law that prohibits a sole proprietor with no employees from having a 401(k) plan?

[wmyer]

No -- and the sole-prop would automatically pass ADP/ACP testing since there are no employees. But if the sole-prop is trying to maximize his or her contributions, then it usually makes more sense simply to have a profit-sharing plan or a SEP if you don't have any employees, anyway, because of the way the 404(a) limit is determined.