What happens to my solo 401k if I hire w-2 employees?1 Reply
May 20, 2022 at 2:50 pm
I have an existing Solo 401k. I am hiring a W2 employee starting on June 1. Am I able to convert my Solo 401k to a Safe Harbor plan? Or am I able to close my Solo 401k and open a new Safe Harbor 401k?David C.
Top ForumsSolo 401k, Solo 401k ContributionsMay 20, 2022 at 2:53 pm
The Solo 401k can’t be maintained if there are full-time non-owner w-2 employees (i.e. employees working 1000 hours per year with 1 year of service or 500 hours per year for 3 consecutive years).
In that case, you either need to (1) find another provider that can change your plan to a plan that accommodates full-time employees (note: the plan will no longer allow for alternative investments); or (2) Alternatively, you can shut down the plan before there are eligible employees.
Please see the following page for an overview of the process for terminating a solo 401k plan: https://www.mysolo401k.net/process-terminating-closing-solo-401k-solo-k-individual-401k-individual-k/
If you have alternative investments in the Solo 401k, please see this post: LLC for Solo 401k & Ultimately Transfer the Solo 401k LLC to a Self-Directed IRA LLC – My Solo 401k Financial
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