Get more tax deductions for your business

With an Individual (or solo) 401(k), you can take a tax deduction for the contributions you make from your business, as well as reduce your personal taxes by contributing as an employee.
An Individual (or solo) 401(k) offers:
  • Access to your money through the 401(k) loan option1
  • Flexible contributions as your cash flow allows
  • Higher contribution limits (up to $53,000)
  • Roth after-tax option for tax-free retirement income
 
Tab One

Good for you, good for your business

Easy to set up and maintain, the Individual 401(k) lets you focus on what's really important: running your business. Plus, you can benefit from both business and potential personal tax advantages.

What retirement plan is right for you? See how an individual 401(k) compares to a SEP IRA.

Business and personal tax breaks

  • Contributions made from the business to the Individual 401(k) plan, administrative costs and plan expenses are generally tax-deductible by your business
  • Reduce your personal taxable income

You're in control

You can choose to contribute in years when cash flow is ample or decide not to when cash flow is reduced—and you can contribute whether or not you have a profit.

For details, see the Individual 401(k) fact sheet (PDF).

Frequently asked questions

Can I start a 401(k) if I don't have employees?

An individual 401(k) is designed for an owner-only business and spouse, if applicable. You and your spouse can maximize contributions up to the compensation limits, which may help manage your tax obligations while planning for retirement.

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

  • You can open and set up your account online in about 30 minutes, and help is available if you need it
  • Full-service recordkeeping and administration are provided through Plan Administrators, Inc. (PAi), who will guide you through the year-end document and report processing with a step-by-step plan

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

No, both terms are used interchangeably to describe a for 401(k) plan that covers only the owner (or the owner and his or her spouse).

What are the potential tax benefits of an Individual 401(k)?

A 401(k) plan offers the potential for significant tax advantages. Employer contributions and plan expenses are generally deductible from the business' income. Plus, pre-tax salary contributions and any earnings are not taxed until withdrawn. For more information, read the guide to tax benefits (PDF).

How much can I contribute annually?

You can make contributions as an employee, through salary deferrals, as well as through contributions you make as the employer. For your "employee" portion, you can contribute up to $18,000 in 2016 (more than three times the individual IRA limit), and if you're age 50 or older, an additional $6,000 in catch-up contributions.
The business portion may not exceed 25% (20% for self-employed) of income or $53,000, whichever is less. This maximum includes the individual contribution, so if you contribute the maximum $18,000 salary deferral ($24,000 if age 50 or older), the maximum company portion can't exceed $35,000.

What are the benefits of the Roth feature in my Individual 401(k) plan?

You may make a Roth contribution to the 401(k) regardless of your income, which means the Roth contribution in the 401(k) is not limited by the compensation cap of a Roth IRA. The difference between pre-tax contributions and Roth (after-tax) contributions is when you pay taxes: The advantages of the Roth feature will vary based on your tax situation and whether you'll be better off paying taxes on the money now or later:
  • With pre-tax contributions you get a tax break now and reduce your current income tax bill and your contributions; any earnings grow tax-deferred until withdrawn in retirement when you may be in a lower rate
  • With Roth (after-tax) contributions, you make your contribution with after-tax dollars—you won't reduce your current income taxes, but the future withdrawal of both contributions and earnings are tax-free (unless you withdraw prior to age 59½, which means you would be subject to a 10% early withdrawal penalty)
Your plan can be pre-tax, after-tax or both, and you can adjust your mix as your tax situation changes.

How do I make contributions?

Contributions are funded through the Automated Clearing House (ACH), a process established as part of your plan set-up.

Do I have until my tax filing deadline to make a business contribution for the previous tax year?

Yes, for your employer contributions. Deferrals from salary or wages are made in the calendar year and are required to be funded as soon as the deferrals can reasonably be segregated from your business's general assets.

Can I roll other retirement funds into my 401(k) account?

Yes, you may roll over other retirement funds into the 401(k). These funds can be from a 401(k) or 403(b) account from a prior employer, 457(b), IRA, or a SEP IRA. You can roll over from a SIMPLE IRA after you have participated in the SIMPLE account for two years.

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 design (you may incur tax penalties and/or fees).
Loans: You may take a loan out against your Individual (or solo) 401(k) account. Loans must be repaid within five years from the date of the loan unless the loan is used to acquire a primary residence.1
Hardship or early withdrawals: Certain situations qualify for a hardship withdrawal and only if all available loans have been taken and other sources of income have been exhausted. These situations include:
  • Unreimbursed medical expenses for you, your spouse or your children
  • Prevent eviction from principal residence due to unpaid mortgage bills or bankruptcy
  • Purchase of primary residence
  • Burial or funeral expenses for deceased parent, spouse or your children
  • College tuition/higher education for you, your spouse or your children
  • Repair damage to principal residence that would qualify for casualty deduction
Salary deferral contributions to 401(k) accounts will be suspended for 6 months after the receipt of the hardship distribution. Withdrawals taken prior to age 59½ are subject not only to regular income tax, but also to an additional 10% federal income tax unless due to death, disability, separation from service and receiving substantially equal periodic payments, or separating from service after age 55.

What are my investment choices?

Funds and model portfolios tailored for the Individual 401(k) by Morningstar Investment Management, LLC, can help take the guesswork out of selecting investments.2

Is guidance available for me or my spouse to help select investments for our accounts?

Yes. Here are a few of the resources available to you:
  • Educational call center support from Plan Administrators, Inc. (PAi), to help answer questions
  • A suite of information and narrated presentations can help you better understand your investment goals, needs and potential investment strategies to consider at different life stages
  • You can invest in the individual funds selected by Morningstar or in their model investment portfolios, which range from Conservative to Aggressive, helping to take the guesswork out of fund selection.2

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

Because you can contribute by salary deferral and employer contribution, you have the ability to contribute more in an Individual 401(k) than a SEP, and even more for an individual over age 50 making a catch-up contribution.
Invest early to improve long-term savings potential
Source: ChartSource, Wealth Management Systems, Inc, 2016. This example is hypothetical and does not represent the performance of a particular investment. Your results will vary. Actual investing includes fees and other expenses that may result in lower returns than this hypothetical example.

What happens if my business grows and I add employees?

We offer a suite of 401(k) options that can meet your changing needs.

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

Form 5500 collects information about certain employee benefit plans, including retirement plans. You're not required to file the form 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.

Tab Two
The Merrill Edge Individual 401(k) is easy and affordable. You can set it up online in about 30 minutes or less, so you can focus more time on your business. And a specialist can help if you want it.

Why choose Merrill Edge for your Individual 401(k)?

  • We take the guesswork out of investing: Choose from funds and model portfolios selected by industry leader Morningstar Investment Management LLC2
  • Simple, straightforward pricing
  • 24/7 online access to your plan and educational resources
  • Recordkeeping, reporting, call center education and support provided by award-winning Plan Administrators, Inc. (PAi)
 
It's easier than you think
See how simple it is to set up and maintain
a Merrill Edge Individual 401(k) Plan.
 
Looking for investment advice and guidance?
Pursue your financial goals with advice and guidance from a licensed Merrill Edge Financial Solutions Advisor™—and ask about getting your own Merrill Edge Roadmap® to help you make a plan and stay on track.
Tab Three

Setting up an Individual 401(k) is quick and easy:

1

Answer a few questions

Take a couple of minutes to answer a few questions and we'll customize a plan to fit your needs. Customize a plan now
 
2

Review your proposal

You can modify the features if you wish during the setup process.
 
3

Purchase your plan

After reviewing your proposal you can purchase your plan online in just a few minutes.
 
4

Set up your plan

Set up your plan in as little as 30 minutes with step-by-step guidance. Help is available if you want it.

Need help setting up your plan? Contact a PAi 401(k) Consultant at 866.890.4177, Mon-Fri 8 a.m.-5 p.m. CT.
 
Tab Four

Pricing and Fees

Individual 401(k) fees

New plan costs3
One time set-up
$100
 
Ongoing monthly administration4
$20–$25
5
Move a plan to Merrill Edge
One time set-up
$150
 
Ongoing monthly administration4
$20–$25
5
Costs for employees participating in the plan6
Asset-based costs7
Investment fiduciary8
0.07%
of account balance annually
 
Participant servicing fee9
0.20%
of account balance annually
 
Account servicing fee10
0.25%
of account balance annually
 
Recordkeeping fees11
$3
per participant monthly
 
 
Fees example:
If John has been participating in the plan all year and has an ending account balance of $10,000 in his company's 401(k) plan, John will pay $36 ($3 x 12 months) in administration fees and $52 (0.52% of $10,000) in service fees that year.
 
Looking for investment advice and guidance?
Pursue your financial goals with advice and guidance from a licensed Merrill Edge Financial Solutions Advisor™—and ask about getting your own Merrill Edge Roadmap® to help you make a plan and stay on track.
Customize an Individual 401(k) plan
Take two minutes to answer a few questions and we'll help you customize a plan for your business.
Need help?
Call 866.890.4177
Contact a PAi 401(k) consultant9
Mon-Fri 8 a.m. – 5 p.m. CT
Already have an account?
Access it now at
401k.merrilledge.com.
Resources
See how simple it is to set up and maintain a Merrill Edge 401(k) plan.
Already have a 401(k) plan?
1 Please consider the advantages and disadvantages of taking a loan before initiating one.

2 Fiduciary services are provided by Morningstar Associates, LLC, a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. Morningstar Associates, LLC is a provider of investment management solutions including investment advisory and retirement plan services. Bank of America Corporation and Morningstar Associates, LLC are not affiliated.

3 Fees will be deducted from business account.

4 Plans with just the owner or owner and spouse pay the administration fee based on one employee.

5 Solo employers with less than $250k in plan assets will pay $20. Solo employers with more than $250k in plan assets will pay $25.

6 Fees will be deducted from each participant's account.

7 Costs for services, based on assets, come out of participating individuals' account balances.

8 Morningstar Associates, LLC selects the investments and is responsible for the ongoing monitoring and maintenance of the investments and model portfolios.

9 Plan Administrators, Inc., (PAi) provides call center education and support to plan participants.

10 Merrill Lynch is responsible for ongoing product management and vendor oversight, as well as trading and custodial services of plan assets and monthly transaction statements.

11 Plan and Participant level recordkeeping services are performed by PAi. This expense is deducted automatically each month.

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