Ind 401K Question

 

Hello,

 

Mike owns 100% of his business and uses an owner only Solo 401k plan because he has no employees.

 

He is thinking about hiring his adult daughter as an employee. If Mike’s 100% ownership is attributed to his daughter, could she also be considered an owner which would allow him to keep using the owner only 401k because his daughter would also be considered an owner too?

Thank you.



No, only the owner and spouse can be covered under a solo K.

If the daughter were hired, she could be excluded from the plan for a short time (eg up the end of the plan year), and then the plan would have to be changed to a full 401k plan including the regulatory requirements that come with it (eg discrimination testing).

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