Solo 401(k) plan "administration."

[Guest new2thegame]

For a solo 401(k) plan (with spouse), are the elective deferrals and timing of deposits the same as with a traditional 401(k) plan? Can the final pay period of the year reflect the maximum deferral (i.e., $12,000 apiece) and then be deposited in January 2003 or are we required to defer a certain percentage in each pay period?

If we defer some each month, can we write one check to make the deposit after year-end? It seems I heard someone say you could do it that way with solo plans.

[Mike Preston]

The requirements are the same. What they actually are will depend on how compensation is paid (W-2? K-1? Schedule C?) and how the elections are timed.

For example, assume a plan is drafted such that an election can be made at any time. It is a C-Corp so all compensation is paid through payroll and reported on a W-2. Assume that the individual in question has an election on file that says: NOTHING. Then, on December 20, that person signs a modified election saying: 90%. Assume one more paycheck during the year for $5,000. That person's election is $4,500 for the year and it should be deposited as soon as it is reasonable to segregate that $4,500 from the general assets of the corporation (PDQ).

Change the facts to a sole proprietorship and it may be possible to delay depositing the funds until after the net Schedule C income is determined, which might be April 10th or so (or even later if on extension).

But I don't think the requirements for a solo k plan are any different than what they are for a non-solo K plan.

[rcline46]

Note that a 'Solo 401(k)' is nothing more than an advertising gimmick. It is a real, full up qualified plan with a 401(k) feature and everything that goes with it.

Anyone in the business has had these since the mid 1980's. It's just the 'extra' in the deferral (but not annual additions) that has increased their popularity.

[Alf]

Can everyone confirm that one participant plans are subject to ERISA? I know it was as issue once, but I am not sure that it was settled. If not subject to ERISA, that would mean that the participant contribution rules would not apply. I do note that the orignal post mentioned a spouse, so this is not relevant for his question.

[Mike Preston]

Alf, the fact that a plan is not an "ERISA plan" doesn't mean that it can ignore the rules in the Internal Revenue Code. A one participant plan that covers the business owner is not an ERISA plan. Neither is a two participant plan that covers the business owner and the business owner's spouse.

But that doesn't mean anything as far as this discussion goes.

[Alf]

My meaningless guess is that the DOL's participant contribution regulations don't apply to a plan that is not subject to ERISA. This was "Newtothegames" original question.