A North Dakota Solo 401(k) is an IRS approved 401(k) qualified retirement plan that was designed specifically by the IRS for the self-employed or small business owner with no employees. The Solo 401K Plan, also called the Individual 401K or Self Directed 401K is perfect retirement plan for any North Dakota sole proprietor or small business owner with no employees.
The Solo 401K plan is treated as a qualified retirement plan under the Employment Retirement Income Security Act of 1974 (ERISA). The Solo 401K Plan is governed by federal rules, which supersede any North Dakota state laws as they relate to an employee benefit plan.
There are many features of the Solo 401(k) plan that make it so appealing and popular among North Dakota self-employed business owners.
Make High Annual Tax Deductible Contributions: One of the most significant advantages of the Solo 401K Plan is that a plan participant can make annual contributions up to $56,000 annually with an additional $6,000 catch up contribution for those over age 50. Compare this with a $6,000 annual IRA contribution limitation ($7,000 for those over the age of 50) and you can see why the Solo 401K Plan is such an attractive retirement plan.
Under the 2019 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $19,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $56,000.
For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $25,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $62,000.
Borrow up to $50,000 Tax-Free: With a Solo 401k Plan, a North Dakota plan participant may borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose. Note – the loan has to be paid back over a five-year period at least quarterly at a minimum prime interest rate (you have the option of selecting a higher interest rate).
Checkbook Control: By establishing a Solo 401K Plan with checkbook control, as trustee of the Solo 401K Plan you can make traditional investments (stocks, mutual funds, etc) as well as non-traditional investments (real estate, precious metals, tax liens, private businesses, etc) tax free and without requiring the custodian consent. Furthermore, the Solo 401K Plan account can be opened at any local bank or credit union in the State of North Dakota. No longer will a financial institution tell you that you cannot make IRS approved investments with your retirement funds, such as real estate. With the Solo 401K Plan, you will have checkbook control over your retirement funds so you can purchase real estate, precious metals, and much more tax-free!
Roth Contributions: The Solo 401K plan contains a built in Roth sub-account which can be contributed to without any income restrictions. The Solo 401K Plan will allow you to make up to $19,0000 ($25,000 if you are over the age 50) of after-tax Roth contributions. In addition, the Solo 401K Plan allows for in-plan Roth rollovers/conversions.
Easy Cost Effective Administration: The Solo 401K Plan is easy to operate. There is generally no annual filing requirement unless your Plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ). Furthermore, there are no federal or North Dakota income tax return filing requirements.
Nonrecourse Financing: With a Solo 401K Plan, purchase real estate in the State of North Dakota or in any state with nonrecourse financing tax-free. This is not the case with a Self Directed IRA.
Asset & Creditor Protection: A Solo 401K Plan will protect your retirement assets in the State of North Dakota from creditor claims both inside and outside of bankruptcy due to ERISA and the Code’s broad anti-alienation protections.
IRS Approved: Each Solo 401K Plan client of the IRA Financial Group will receive an IRS opinion letter along with copies of all the Plan documents. Our in-house tax and ERISA professionals will work directly with you to help establish your Solo 401K Plan, open your Plan bank account at any local bank in the State of North Dakota, assist with the rollover of funds to the new Plan, as well as complete the Solo 401K loan documents, if necessary. You will have direct access to our tax and ERISA professionals throughout the set-up and adoption of your IRS approved Solo 401(k) Plan.