Safe Harbor vs Solo 401k Conversion

I’ve done some googling and ChatGPT and seem to get conflicting information.

My situation is I am a business owner with a self-administered Safe Harbor 401k. There are (were) two participants, myself and a full time employee.  My employee has resigned and I’ve hired a part time employee, who will work less than 1000 hours per year, and I may hire a second (similar) part time employee.

My current Safe Harbor 401k states that employees with a year of service and working over 1000 hours per year qualifies for the plan.  
 

Can I maintain my current plan with a single participant (myself) or do I need to convert to a Solo 401k plan.

i prefer to maintain my current plan, if possible, even though I understand the benefits of Solo.  If I can’t maintain this, is Solo even an option, as it is unclear if even part time employees may disqualify me.

thanks!

bluehavana2 as Bill outlined, there is no such thing as a "Solo K", what they are is a Profit Sharing 401(k) Plan for owner's only, no common-law employees.  The only difference is the TPA will usually charge a lower fee when there are no common-law employees.  As Bill mentioned you will need to reach out to a TPA to assure your Plan remain compliant and prepare any necessary filing.

Your part time employees would become eligible to defer if they worked over 500 hours in 2 consecutive years even if they don't meet the 12 month 1000 hour eligibility requirement. There are a lot of regulations to navigate to maintain compliance and plan qualification which is why as mentioned above you should have a TPA to guide you through your changes. Penalties can be very costly, and plans can be disqualified if found noncompliant. As far as your plan goes, you shouldn't have to "convert" anything. You may just need to amend your plan to meet your needs as they change.  

Thank you all for your replies.  Just to clarify, I’ve had this Safe Harbor plan in place for 5 years.  The plan is with Morgan Stanley.  I doubt they are as experienced as others but, at the time, my financial advisor assured me that everything was above board.  The plan was created through their detailed questionnaire and is a fully compliant plan.  My accountant handles the annual 5500s and I review these carefully, as I learn by doing.  Originally, I chose this route, as I do my own payroll processing (with accountant filing monthly/quarterly/annual forms) and the TPAs I spoke with at the time did not want to break out payroll from administration.

From your input, it sounds like I’m good to go with maintaining this plan with a single participant.  I wasn’t sure that the Secure 2.0 requirement for LTPT employees overrode my current plan or if I was grandfathered in but my intention is to shut down the plan in a couple of years so I shouldn’t hit that roadblock.  I will reach out to Morgan Stanley in hopes that they are more qualified than I originally thought to answer my questions on all this.

Your plan sounds like it can work.  If your document was written correctly, you will be fine. Many advisor-provided plan documents I reviewed over the years had problems.  They manage money, not write plan provisions.  Hopefully you will be one of the lucky ones.  And hopefully Morgan Stanley provided an updated plan document 3 years ago. If not, you will want to fix that.

The hassle, of course, will arise when either LTPT (long time, part time) employee becomes eligible for deferrals only, and you have to set up the account for him/her.

3 hours ago, Dan said:

Your plan sounds like it can work.  If your document was written correctly, you will be fine. Many advisor-provided plan documents I reviewed over the years had problems.  They manage money, not write plan provisions.  Hopefully you will be one of the lucky ones.  And hopefully Morgan Stanley provided an updated plan document 3 years ago. If not, you will want to fix that.

I’m confident it was originally written correctly but was not updated 3 years ago (I assume for Secure 2.0?).  My interaction with MS has been through my financial advisor, who I don’t believe is very familiar with plan docs.  It appears that MS can provide me with the information I require and will be reaching out to work with their retirement specialists to assist me in modifying my plan to something more relevant to my current situation, as well as addressing any changes that should have been made 3 years ago.

Update: I did receive the cycle 3 restatement in 5/2022 and successfully submitted update.

1 hour ago, bluehavana2 said:

I’m confident it was originally written correctly but was not updated 3 years ago (I assume for Secure 2.0?)

No, Dan is referring to the Cycle 3 restatement due July 31, 2022, this did not incorporate Secure 1.0 or 2.0

37 minutes ago, WCC said:

No, Dan is referring to the Cycle 3 restatement due July 31, 2022, this did not incorporate Secure 1.0 or 2.0

Thanks.  I did the restatement 5/2022.  (Whew!)