Individual 401k

Individual 401ks (or Solo 401ks) are the ultimate retirement account if you are looking to save the largest amount of money. They provide much of the same profit-sharing advantages as a typical 401k. But, Solo 401k plans provide less complexity and lower costs.

401k Benefits infographic


Individual 401k Plan Benefits

  • Participants can borrow up to 50% of the account balance up to a maximum of $50,000. The loan can be for any reason.
  • As the Trustee of your plan, you can have checkbook control of your funds, so you have your money when you need it.
  • You can contribute up to ten times more annually than you can to an IRA and reduce your taxable income.
  • Your plan includes a brokerage account for the traditional part of your asset, so you have the freedom to diversify the way you want.
  • Can invest in any permissible alternative asset in saving for retirement.

Who Is Eligible for a Solo 401k Plan?

Self-employed who generate income from their business to make contributions to the plan. All business entity types are eligible for this plan. This includes sole proprietors, partnerships, and corporations.

Employee Restrictions

Your business cannot have employees other than yourself, or your spouse. The business owners or partners are considered owner-employees rather than employees. Certain employees are excluded from coverage in the plan. Employees under 21 and employees that work less than 1,000 hours annually are excluded from coverage. Union employees and non-resident alien employees are also excluded.

Download the 401k Plan Responsibilities Guide

Download this guide for a complete breakdown of the responsibilities within a 401k plan. In reviewing this document, you will better understand the roles you (the client and likely Trustee) and Midland play in your plan.

401k Responsibilities Guide cover

This Guide provides a complete breakdown of the responsibilities within a 401k plan.

2022 Individual 401k Plan Contribution Limits

Employee Salary Deferral: $20,500
Salary Deferral Catch Up Contribution (age 50+): $6,500
Employer Profit-Sharing Contribution: Up to 25% of salary of self-employed earning
Total Contributions-Salary Deferral plus Profit Sharing Match (under age 50): $61,000
Total Contributions-Salary Deferral plus Profit Sharing Match (age 50+): $67,500

Open an Individual 401k Plan with Midland

Midland Individual 401k Plan

If you are self-employed, have no employees, and want a plan where Midland is here to answer any questions you may have, this may be the plan for you. This is our most popular 401k plan because Midland handles the recordkeeping and administration for your plan, as well as reporting annual distributions to the IRS. This is a great option if you want Midland to help guide you through the ins and outs of your plan and ensure your plan is in compliance with IRS guidelines.

Complete Control Individual 401k Plan

Please contact us to set up this plan type by calling (239) 333-4466.

One of our dedicated 401k team members will be happy to assist you with opening an Individual 401k plan.

Please fill out the form below and one of our 401k team members will reach out to you. Or, contact our 401k team directly at (239) 333-4466.

How to Terminate an Individual 401k Plan

You can close your Solo(k) plan in three steps.

Step 1: Rollover or Distribute the Plan’s Assets

You can rollover your plan’s funds into another qualified retirement account such as an IRA. This is generally not a taxable event. You will need to notify the IRS when you file taxes for the year in which you do the rollover. This strategy is preferred by those who own alternative assets.

Or, you can distribute funds from your plan. Distributing assets may be a taxable event. If distributed funds are not pre-taxed, you will owe taxes. And, if you are under the age of 59.5, you may owe a 10% early withdrawal penalty. You should discuss this option with your CPA. They will be able to calculate what you may owe on the distribution. You or your CPA need to file Form 1099-R within 12 months of terminating the plan.

Step 2: Notify the Plan’s Document Provider

The document provider marks your plan inactive upon notice of fund withdrawal. You will sign a cancellation form in most cases.

Step 3: File Form 5500-EZ

When you terminate your Individual 401(k), you must file Form 5500-EZ. This is the case whether you rolled over or distributed the plan’s funds. You should file Form 5500-EZ by July 31st of the year following your plan’s termination.

Individual 401(k) FAQs

Can I Make Contributions to Both My Individual 401(k) and My IRA for the Same Tax Year?

How Do I Calculate How Much I Can Contribute to My 401(k)?

I Earn a Small Amount of Self-Employment Income but Expect That Amount to Increase in the Coming Years. if I Don’t Know My Income When Should I Contribute?

I Have a Full-Time Day Job and Max Out My 401(k), but I Also Have Self-Employment Income. Can I Also Contribute to My Individual 401(k) if I Am Already Maxing Out My Day Job 401(k)?

Am I Able to Contribute Post-Tax, Roth Contributions to My Plan or Can I Only Do This in My IRA?

What Is the Deadline for Me to Establish My Plan?

Will You Generate a 1099-R if I Take Distributions From the Plan?

What Protections Does My Plan Have Should I File for Bankruptcy? I’ve Heard That 401(k)S Have Unlimited Bankruptcy Protection, Is That True?

I Am Over 72 and My Business Is Still Making Money, Am I Allowed to Fund My 401(k)?

What Happens When I Want to Close My 401(k)? Can I Move My Assets to an IRA Account? Are There Any Penalties for Changing My Account Type?

What Happens to My Plan if I Hire Full-Time Employees?

Does UDFI (Unrelated Debt-Financed Income) Apply to Individual 401(k)s?

Can I Own a Business in My Midland 401(k)?

What Types of Investments Can My Individual 401(k) Invest In?

Contact Our Individual 401(k) Team

[email protected]
(239) 333-4466