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You have the option to contribute up-to $11,000. However, your contribution should not exceed 100% of your salary. The upper limit is set at $40,000 for combined employer and salary deferral contribution. In case of employed self individuals the upper limit is 20% of the earnings and employer contribution limits are 25% or below. Like other 401K plans, 401K plan for solo proprietor or owner of small business has provisions of catch-up contributions. Sole proprietors are small businesses owners can make additional contribution of $1000 salary deferrals. Such catch-up contributions are excluded from the upper limit of contribution i.e. $40,000.
Rollovers for 401K sole proprietors and small business owners
Like other 401K plans, 401K solo proprietor plan and 401K small business owner’s plan also has the provisions of rollover. You have the option to transfer your savings to other plans such as IRA, Qualified Plans or SEP. You may also choose to transfer your plan proceeds to other funds like Defined Benefit funds, profit sharing and Pension purchase. You have the option to rollover your 401K individual or small business owner’s plan to into new 401K plan. This is applicable only when you have plan under section 401K, 403(b) and 457 plans. You have the option to rollover to a simple IRA. Only condition is that you have to fulfill laid down holding period of two years, to rollover your plan to a simple IRA.
401K Distributions
Distributions arising from 410k retirement plan can be subjected to rollover treatment or treated as lump-sum distributions if they fulfill other conditions. Hardships distributions made from 410k plan are not considered as distributions eligible for rolling over.If any employee receives the 401k plan distributions may have to pay 10% penalty unless these distributions fall under the category of distributions that are exempted from penalty.
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Category: 401k Plans · Information for small business · Retirement Plans
Tags: Conditions of eligibility for 401K, small business 401K.
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2 responses so far ↓
1 401k Rules and Laws // Jan 28, 2008 at 1:37 pm
[…] legislation makes it mandatory for the employers to inform the eligibility conditions to employees for choosing 401k plan or other contribution plans of the company. Generally, this is […]
2 George Bernier // Jul 13, 2008 at 1:27 pm
My employer has stated that I cannot roll over my 401K until I am no longer employed by them. Is this true? It was 100% funded by me. They contributed nothing.