401(K) Individual Plan

The 401(k) individual plan is designed specifically for owner-only businesses that employ a spouse or the owner’s immediate family members. This is now available with the NEW ROTH 401(k) enhancement. It is also designed for businesses with part-time employees who are not eligible to participate in the plan. If your business fits this description-whether it is a corporation, partnership, sole proprietorship or nonprofit entity-the Individual 401(k) may be for you.

Key Benefits:

Employer can make a tax-deductible contribution of up to 25% of compensation plus as much as another $16,500 in salary deferrals ($22,000 if age 50 or older). Total compensation cannot exceed the lesser of 100% of compensation $49,000 in 2009.
Availability of loans and hardship withdrawals
No top-heavy and discrimination testing required

Possible Drawbacks:

All contributions are immediately 100% vested
May require filing of IRS Form 5500 if assets exceed $100,000