Opportunities offered by the "mini" 401(k)

The 2003 Tax Act did not impact the rules established by the Economic Growth & Tax Relief Reconciliation Act of 2001 which created an opportunity to significantly increase contributions to one-participant retirement plans. Mini 401(k) plans can significantly increase contribution options to one-...

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Bibliographic Details
Published in:Pennsylvania CPA Journal 2003-10, Vol.74 (3), p.16
Main Author: Rogers, Bruce J
Format: Article
Language:English
Subjects:
Advantages
Compensation
Contributions
Deferred compensation
Medicare
Net income
Profit sharing plans
Relief provisions
Retirement plans
Self employment
SEP
Simplification
Social security
Sole proprietorships
Tax deductions
Wages & salaries
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Summary:The 2003 Tax Act did not impact the rules established by the Economic Growth & Tax Relief Reconciliation Act of 2001 which created an opportunity to significantly increase contributions to one-participant retirement plans. Mini 401(k) plans can significantly increase contribution options to one-participant retirement plans. Under the right circumstances, these mini 401(k) plans permit much larger annual deductible contributions than were previously allowed. These plans, which cover only an owner, are not subject to the nondiscrimination and coverage testing applicable to normal 401(k) plans, making them much more cost-effective to establish and maintain. Other facts to consider are that loans are allowed and that elective deferral is an individual limit.
ISSN:0746-1062