Question: Fithut has a one-participant [solo 401(k)] plan that covers Sophia, the owner and sole employee. During 2020, Fithut hired Alex, age 18, as a part-time,150-hour-a-year employee. Can the business continue to have the solo 401(k) plan, or must a standard 401(k) plan be established?
Answer: Fithut can still qualify for a solo 401(k) plan since there is an exclusion for young and part-time employees. A solo 401(k) plan can exclude from coverage any employee who is under age 21 and any employee who has not worked for at least 1,000 hours during any 12-month period [§§410(a)(1)(A) and (a)(3)(A)].
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.