Solo K is Simpler
By Steve Sheppherd
Why is the Solo 401(k) so simple? I mean a lot of people have some sort of an idea about the complexity of a regular 401(k). But, why is the Solo 401(k) so simple?
Well frankly, when they set up the retirement programs, it is the company that sponsors the plan. So the company says,
“We’re going to put together a plan. We’re going to match what you put in. We’re going to match half of it. We’re going to make rules. We will match it until you’re there six months, or until you’re there a year. We won’t let you move it unless you quit.”
You know, they can make up all the rules because they are the ones that are paying for and putting the plan together. So what happens concerning the Solo 401(k) is, the government says,
“Alright, since the employer is going to do this, once they say they’re going to do it, we need to protect the employee and make sure that he doesn’t get cheated somehow. We need to be sure that the employers don’t cook the books or change the rules, or whatever and take advantage of the employees.”
Alright, so there is a lot of rules, lots of reporting that has to go through all of that with the idea of protecting the employee.
Well, the Solo 401(k) is designed for the employee, who is also the employer. He has no other employees, therefore the government says,
“Well, we don’t really need to protect the employee because it’s the employer. There’s no one to protect.”
So we’ re going to throw this rule out. We’re going to throw that reporting out. We’re going to make it easier for you to actually have the Solo 401(k).
And that is why it is much easier.
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