In addition to standard 401(k) Plans we also provide the “Mini and/or Single” 401(k) Plan for a single owner/employee, which is a newer retirement savings alternative for business owners employing only the owner and his or her immediate family members, those who employ the owner & only highly compensated employees, or those who employ the owner and other part-time employees that may be excluded from plan participation. These businesses include corporations, partnerships, sole proprietorships and non-profit entities. They can be incorporated or unincorporated.

Historically, 401(k)’s for these types of business owners weren’t an option because salary deferrals were considered employer contributions that applied toward the employer’s maximum deductible contribution. In short, nothing was gained by adopting a 401(k) plan, instead of say a, Profit-sharing plan for these types of business owners.

Recent Pension reform legislation has changed all this to help many small business owners shelter a significantly greater portion of their income from taxation than they were previously able to do with conventional business retirement plans such as SIMPLE’s and SEP’s.

A “Mini and/or Single” 401(k) Plan is not suitable for businesses with existing rank and file employees (consisting of other than family members or highly compensated employees, or non-qualifying part-time employees). So, if you are a “mini-sized” employer, intending to expand your business in the future, you will need to amend the “Mini and/or Single” 401(k) Plan and adopt a new plan (i.e. regular 401(k)) before hiring such, other types, of eligible employee participants.

Funding (2002) for the typical “Mini and/or Single 401(k) Plan”:

  • The employer may make a deductible profit-sharing contribution equal to 25% of pay based on the first $200,000 of compensation up to $40,000 maximum.

  • Salary deferrals equal to 100% of employee’s compensation up to $11,000 are permitted. Individuals age 50 or older may contribute an additional $1,000 in catch-up contributions.

  • The overall annual maximum contribution to the plan cannot exceed $40,000 or, $41,000 if age 50 or older.

Plan Establishments and Funding Deadlines

Employers may establish a plan up until the fiscal year-end, usually December 31st of a plan year. The employer has up until the final deadline for their federal tax return to actually “fund” the plan (input the dollars). If the business is incorporated, then any salary deferrals must be made within the calendar year. If the business is unincorporated (i.e. sole proprietorships, partnerships, S-Corporations, and certain types of LLC’s), salary deferrals must be made by the the tax filing deadline of that type of business structure, including extensions.


Contributions up to 25% of compensation may be deducted by the employer as a business expense. Contributions and investment earnings grow tax deferred until withdrawal.


Age 21; Two years of service (1000 hours within each of those two years). The employer may set less restrictive requirements.


Immediate 100% vesting

Hardship Withdrawals:

Usually Not Available


Varies by Plan – Most Offer


Not required


1099R and possibly form 5500 if assets exceed $100,000

Disclaimer: The material discussed herein is meant for general illustration or informational purposes only and is not to be construed as financial advice. Although the information has been gathered from sources believed to be reliable, it is not guaranteed. Please note that individual situations can vary; therefore, the information contained herein should be relied upon only when coordinated with individual professional advice. We are not licensed for and therefore do not provide tax or legal advice.

About the Author: Paul M. League, QFP — QUALIFIED FINANCIAL PLANNER, is the Founding Principal of League Financial & Insurance Services (, which is a privately held company, established in 1984, and located in Palm Desert, CA. Paul and his company specialize in assisting clients to create, expand & preserve assets “…in a league of our own.” Contact Information: Paul M. League, P.O. Box 11800, Palm Desert, CA 92255-1800; 800.482.5347; © Paul M. League. All rights reserved.

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