401(k) for self employed

[thepensionmaven]

Potential client started business in June 2016 as a sole proprietor, wants to set up 401K/PSP by 12/31

He was told by another TPA firm if he establishes the plan 12/1/16 (I assume they are speaking of a December 1, 2016 effective date - which makes no sense), that he could only base his 25% on net schedule C from December 1- December 31.

Why would not effective date of the plan not be 1/1/2016 if the intent was to make the full 25 PSP on his self employed income?

Then again, if the full Schedule c was from June - December, why would the prospect be told that he could only do one month?

Unless, the broker did not explain the situation correctly.

[rcline46]

A lot of people who know nothing of the regulations/law are allowed to sell. Many brokers think they can call themselves 'third party administrators' and get away with it