deadline 401K plan set up for 2019

Technical topics regarding tax preparation.
#1
Andrew  
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Client is in the process of hiring an employee. I read the deadline to set up a 401K is 10/1/2019 for 2019. Does that mean she can no longer contribute to her own 401K but has to include the employee? This is a partnership.

But what for a company that didn't know they would have employees at that time in October?

Also, looking for a cost effective 401K plan for company with 1 -2 employees.
 

#2
COGS  
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Solo 401Ks have a December 31 date. Schwab or Fidelity should be able to do it.

Hmm. But as I looked for a source, this came up which I did not read too attentively: https://www.mysolo401k.net/solo-401k-se ... cember-31/
 

#3
JR1  
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Cost effective is to use a payroll service that can handle it...
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#4
COGS  
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JRI, I am starting the think the payroll service answer is not the most cost effective. It is easy. I had a client switch from the payroll company to Fidelity and she saved a lot of money.
 

#5
HowardS  
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Does that mean she can no longer contribute to her own 401K but has to include the employee?

If she currently has a solo 401k it typically is worded to exclude employees with less than one year of service. Additionally, if the employee works less than 1000 hours in the year the employee is excluded. You'd have to read her 401k plan document to see what applies. For 2020 she wouldn't be able to contribute to a solo 401k and would need a full 401k plan to replace it.

Cost effective is to use a payroll service that can handle it...

+1 The discrimination testing part is a killer.
Retired, no salvage value.
 

#6
Andrew  
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Thanks. I'm also looking into a SEP where the employer can exclude any employee who hasn't worked for them in 3 out of the last 5 years. And then the employer can end the plan before the employee will be eligible to participate if she wants to. I was not impressed with Fidelity's plan document. Their Solo 401K states you can't have an employee while you can if the person works less than 1000 hours/year. Also, the people on the phone are not always knowledgeable.
 

#7
JR1  
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I did wonder why you jumped to 401k....the most costly arrangement. Start the SEP...if you want to move to a SIMPLE plan next year, go for it. No admin costs, plenty of contribution dollars and ability to exclude newer employees. Make sure you don't exclude your owner tho'!
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#8
Doug M  
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The safe harbor 401k has the 10/1 date restriction. No testing requirements.

Done correctly, the plan is not expensive.
 

#9
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T Rowe Price has several plans (SEP, Solo401(k) Etc) and most of the small business plans do not have fees. They also give GREAT customer support. I usually direct my small businesses to TRP
 


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