Solo401k and Statuatory w2 income

[cwparsons]

Is statuatory w2 income excluded for a sole proprietor in calculating income for the purposes of salary deferral or ER contribution?

[Larry Starr]

13 minutes ago, cwparsons said:

Is statuatory w2 income excluded for a sole proprietor in calculating income for the purposes of salary deferral or ER contribution?

Derrin has covered this on the site: check out this link: https://benefitslink.com/cgi-bin/qa.cgi?n=49&db=qa_who_is_employer

 

[cwparsons]

Thank you.  I see that it says for Insurance reps that they can be included on the Employer plan and cannot be on their own plan. i can see that they couldn't set up their own plan if they were covered by their ER plan, but what if they don't qualify for their Employer's plan?

[Larry Starr]

On 3/7/2020 at 1:49 PM, cwparsons said:

Thank you.  I see that it says for Insurance reps that they can be included on the Employer plan and cannot be on their own plan. i can see that they couldn't set up their own plan if they were covered by their ER plan, but what if they don't qualify for their Employer's plan?

The issue is that they are not considered an employer for purposes of their retirement possibilities regarding income from their primary insurance company because they will get a W-2. Therefore, whether they are eligible or not for the plan, they are not eligible to set up their own plan on those funds because they are not an employer.

 However, many insurance folks have outside income from other insurance companies and products and for that they will file (usually) a Schedule C and for that income they can have their own plan.