Introduction
Changes to the tax law effective January 1, 2002 made one-participant 401(k) plans advantageous for many self-employed individuals. A one-participant 401(k) plan generally is a profit sharing plan which permits a section 401(k) deferral. Our professionals have developed a range of services for such plans. For convenience purposes, this web page was designed to organize the information necessary for a self-employed individual, or their representative, to:
research whether a one-participant 401(k) plan would be of benefit;
determine the contributions the individual could make under various plan designs;
prepare the legal documents necessary to establish the plan; and
comply with the various reporting requirements of the Internal Revenue Code.
Research and Background Information
George M. Morrison, Esq., principal of G.M. Morrison, P.C. and Continental Benefits Group, Inc., authored an article which discusses the changes made by the Economic Growth and Tax Relief and Reconciliation Act of 2001 ("EGTRRA") which created the advantages of a one-participant 401(k) plan. We would recommend that you read this article prior to deciding whether to adopt a one-participant plan.
Calculation of Deductible Contributions
The advantage of a tax-qualified retirement plan over other retirement investments is the fact that the contributions to the plan are, within limits, deductible as a business expense. The limit on the deductible contributions is discussed in the article discussed above. For convenience, you can enter your age and compensation below and the maximum deductible contribution will be calculated for you:
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Keep in mind the following. The calculations set forth above assume: (i) no other plan is sponsored by the individual, and (ii) the individual does not participate in another 401(k) plan or 403(b) plan of another employer. Also, it is assumed that the individual would maximize the profit sharing contribution prior to maximizing the 401(k) contribution because the 401(k) contribution is subject to federal employment taxes (i.e., FICA and Medicare) and certain state and local income taxes.
Preparation of Documents
CBGI and G.M. Morrison, P.C. have simplified the plan adoption process for one-participant 401(k) plans. In this respect, we can prepare the necessary legal documents in about 24 hours for only $250. To begin the process, click here to send us an email request for the necessary forms. We will reply in less than one hour (during business day). Once you provide the necessary information, we will prepare the necessary documents, call you with any questions, and forward the documents to you for review with an invoice for our services.
Compliance Services
Qualified plans can be difficult to sponsor if one does not monitor their reporting and disclosure obligations. For example, failing to file a required tax return can result in a $100 per day penalty of up to $15,000 per year. CBGI and G.M. Morrison, P.C. can monitor and complete these requirements for you for $200 per year. This includes an annual analysis of whether a return is required and the completion of that return if and when it is required. We are also available to answer questions that arise throughout the year related to the plan. Information regarding this service will be provided when documents are prepared.