Solo 401k Annual Testing
A business owner/the self-employed with no common-law employees (full time employees--those working in excess of 1,000 hours per year) does not need to perform nondiscrimination testing (performed to ensure all eligible employees have been given option to participate in the Solo 401k plan and contributions processed) for the plan because there are no employees who could have received dissimilar benefits.
However, the no-testing advantage disappears if the owner-only business hires employees. No matter what the 401(k) plan is called by a Solo 401k provider, it must satisfy the rules of the Internal Revenue Code. If full-time employees are hired and they meet the eligibility requirements of the Solo 401k plan and the Code, they must be included in the plan and their elective deferrals will be subject to nondiscrimination testing (unless the 401(k) plan is a safe harbor plan or other plan exempt from testing).
A Solo 401k plan is generally required to file an annual report on Form 5500-EZ it has $250,000 or more in assets at the end of the year.
However, the no-testing advantage disappears if the owner-only business hires employees. No matter what the 401(k) plan is called by a Solo 401k provider, it must satisfy the rules of the Internal Revenue Code. If full-time employees are hired and they meet the eligibility requirements of the Solo 401k plan and the Code, they must be included in the plan and their elective deferrals will be subject to nondiscrimination testing (unless the 401(k) plan is a safe harbor plan or other plan exempt from testing).
A Solo 401k plan is generally required to file an annual report on Form 5500-EZ it has $250,000 or more in assets at the end of the year.