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Reduce your personal and business taxes while having access to your money through loansFootnote 2 with this affordable plan for self-employed business owners and their spouses. Below, you'll find answers to frequently asked questions about Individual 401(k) plans, rules, contribution limits and more.

Can I start a 401(k) if I'm self employed without employees?

Yes, you can. An Individual 401(k) is designed for a business owner without W-2 employees and, if married, the owner's spouse. This applies to 1099 contractors and freelancers as well.

How much can I contribute annually?

You can make contributions as an employee, through salary deferrals, and also as an employer, through contributions made by your business. As an employee, you can contribute up to $19,500 for 2020, or $26,000 for those 50 and older (limits for 2019 are $19,000 and $25,000). The employer contribution may not exceed 25% of the employee's compensation (20% of self-employed net earnings). The maximum combined total annual contribution is $57,000 ($56,000 for 2019), which includes the employee and employer contributions.Footnote 3

What are the potential tax benefits?

Employer contributions and plan expenses are generally tax deductible for the business. Pre-tax salary contributions and any earnings are not taxed until withdrawn, and Roth (post-tax) contributions may be withdrawn tax free after age 59½.

Can I withdraw funds or take a loan from my Individual 401(k) account?

Yes. Loans and withdrawals are available if you choose these features in your plan, though you may incur tax penalties and/or fees. For more information, read "Know the facts about loans and withdrawals" (PDF).Footnote 2

How much does it cost to set up and administer for an Individual 401(k)?

For your business, there is a one-time setup fee of $100 for new plans and $100 for converting an existing 401(k) plan to a Merrill plan. Once the plan is set up, the monthly administration fee is $20 or $25, depending on total plan assets.Footnote 4
As an employee, you will pay a $3 monthly recordkeeping fee and an annual service fee of 0.52% of plan assets.Footnotes 1, 5

Is there a difference between an Individual 401(k) and a solo 401(k)?

No, both solo 401(k) and Individual 401(k) are used interchangeably.

Is it complicated to open and administer for an Individual 401(k) plan?

Not at all. You can open and set up your account online in about 30 minutes. Full-service recordkeeping, administration and support are provided through Plan Administrators, Inc. (PAi).Footnote 1

What is the difference between Roth and pre‑tax contributions?

The difference between Roth (after-tax) and pre-tax contributions is when you pay taxes.
  • With Roth contributions, you make contributions with after-tax dollars. Once the account has been open for 5 years, future withdrawals of both contributions and earnings are tax free unless you withdraw prior to age 59½.
  • With pre-tax contributions, you get a tax break now, reducing your current taxable income. Earnings grow tax-deferred until withdrawn in retirement.

What is the deadline to make a contribution for the prior year?

As an employer, you have until your tax-filing deadline to contribute to your Individual 401(k). Deferrals from your salary or wages must be made during the current calendar year.

Can I roll over funds from a retirement account with a previous employer?

Yes. You can consolidate your retirement assets by rolling over 401(k), 403(b), 457 and SEP IRA accounts into a Merrill Individual 401(k). You can also roll over a SIMPLE IRA after you have participated in the account for 2 years.
A Rollover IRA isn't right for everyone. Consider all of your choices and learn if a rollover may be right for you. For additional information, call 888.637.3343888.637.3343 to speak with a rollover specialist, 24/7.Footnote 

When are contributions fully vested?

Employee and employer contributions are 100% vested immediately.

What investment choices are available?

You can invest in individual funds and/or model portfolios — selected by Morningstar Investment Management LLC — which are designed to help take the guesswork out of selecting investments. You can also access educational call center support from Plan Administrators, Inc. (PAi) and a suite of online investor-education resources.Footnote 1

What is the plan establishment deadline?

Most plans may be set up any time before the end of the tax year, but be sure to allow enough time to make employee contributions before the year ends.

What's the difference between an Individual 401(k) and a SEP IRA?

Because you can contribute through salary deferrals in addition to employer contributions, you have the ability to contribute more in an Individual 401(k) than a SEP IRA, which is eligible for employer contributions only.

Is an IRS Form 5500 filing required, and if so, will you complete the form?

You're not required to file Form 5500 unless the plan has more than $250,000 in assets at the end of the plan year. If your plan meets that threshold, a signature-ready Form 5500 will be prepared for your review at no additional cost.

Compare small business retirement plans

Need help or have questions?

Call 866.890.4177866.890.4177
Mon-Fri 8 a.m. - 5 p.m. CT to speak with a PAiFootnote 1 401(k) Consultant
Footnote  You have choices about what to do with your employer-sponsored retirement plan accounts. Depending on your financial circumstances, needs and goals, you may choose to roll over to an IRA or convert to a Roth IRA, roll over an employer-sponsored plan from your old job to your new employer, take a distribution, or leave the account where it is. Each choice may offer different investment options and services, fees and expenses, withdrawal options, required minimum distributions, tax treatment, and different types of protection from creditors and legal judgments. These are complex choices and should be considered with care. Visit or call a Merrill rollover specialist at 888.637.3343888.637.3343 for more information about your choices.

Important disclosures

Footnote 1 Plan- and participant-level administrative and recordkeeping services for Merrill Individual 401(k)s are provided by Plan Administrators, Inc. (PAi). Investment advisory and fiduciary services are provided by Morningstar Investment Management LLC, a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. Morningstar Investment Management LLC is a provider of investment management solutions, including investment advisory and retirement plan services. Educational call center support will be provided by PAi. Bank of America Corporation, PAi and Morningstar Investment Management LLC are not affiliated.
Footnote 2 Please consider the advantages and disadvantages of taking a loan before initiating one.
Footnote 3 Contribution and compensation limits are subject to a cost-of-living adjustment annually pursuant to the Internal Revenue Code. Contribution and compensation limits for subsequent years may vary.
Footnote 4 Businesses with less than $250,000 in plan assets will pay $20. Businesses with more than $250,000 in plan assets will pay $25.
Contribution and compensation limits are subject to a cost-of-living adjustment annually pursuant to the Internal Revenue Code. Contribution and compensation limits for subsequent years may vary.
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