SOLO K Requirement Question

A client has maintained a SOLO K for a few years - with just him and spouse participating.  There is NO age/service requirement - now they hired their minor kids.  Since it is still family - is there any requirement to change to a regular 401k at this point?  There are NO no-family employees.  

It should be just a matter of your document's definition of an Eligible Employee.  It sounds as though you've got a specialized plan document, and those can say they invalidate upon specific common-law employees becoming eligible.  But if the document restricts its use only when there's an owner and family members, you might be okay.

I always thought SOLO K was a marketing term.

If the plan sponsor is an S-Corp, assuming only family members, they can file 5500-EZ.

However, even if a marketing term as imchipbrown stated, some solo 401k providers may not allow. The documents are usually prototypes (at the ones I have seen) and they may have certain requirements, as Bri indicated.

FWIW

12 hours ago, Jakyasar said:

However, even if a marketing term as imchipbrown stated, some solo 401k providers may not allow.

May not allow what?

51 minutes ago, Bird said:

May not allow what?

May not allow kids be in the solo 401k plan, just the spouse.

I always thought that if the kids were in the Plan than 5500-EZ was off the table.  Am I off base due to "must" file vs. "may" file?  

Who Must File Form 5500-EZ
You must file Form 5500-EZ for a retirement plan if the plan is a one-participant plan or a foreign plan that is required to file an annual return under section 6058(a).
A one-participant plan means a retirement plan (that is, a defined benefit pension plan or a defined contribution profit-sharing or money purchase pension plan), other than an Employee Stock Ownership Plan (ESOP), which:
1. Covers only you (or you and your spouse) and you (or you and your spouse) own the entire business (which may be incorporated or unincorporated); or
2. Covers only one or more partners (or partners and their spouses) in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC §1372(b), as a partner); and
3. Does not provide benefits for anyone except you (or you and your spouse) or one or more partners (or partners and their spouses)

I think some places create a stripped down version of a plan document that caters to an owners/partners only setup.  Once employees are involved, then the document cannot be relied upon.

3 hours ago, Jakyasar said:

May not allow kids be in the solo 401k plan, just the spouse.

29 minutes ago, BG5150 said:

I think some places create a stripped down version of a plan document that caters to an owners/partners only setup.  Once employees are involved, then the document cannot be relied upon.

mmm. OK, I haven't seen that; they are definitely stripped down but anything I've seen doesn't have such exclusions.  I don't need to see it so don't bother proving it...

The kids are not  actively

participating, but since no eligibility requirements - I guess they technically are eligible and may be considered participants?  

If they are eligible but not electing to defer, they are participants.

If they are eligible but excluded categorically, they are not participants.