Personal Finance & Estate › Retirement accounts & pensions › 401(k) plan
Solo 401(k) (owner-only plan)
Since 2002· Account or plan
Law or rule (2026)Set by statute, regulation or the agency; numbers change yearly.
A 401(k) for a business owner with no employees other than a spouse, allowing very large contributions.
See it on the Personal Finance & Estate map →How it works
Since a 2001 law took effect in 2002, the owner contributes twice: as employee, up to $24,500 in 2026 (plus catch-up), and as employer, up to 25% of pay (about 20% of net self-employment earnings), capped at $72,000 total. It needs earned income: wages or self-employment profit; rental income usually doesn't count. Form 5500-EZ is due once assets top $250,000. Main trap: an eligible employee ends solo status. Ask your CPA how your entity's pay is figured.
Why it matters for you
For one-person businesses it usually beats a SEP: higher contributions at modest income, Roth options, loans, and no backdoor-Roth pro-rata problem.
Rules, limits and sources (2026)
EGTRRA (2001); IRC Secs. 401(k) and 415(c); the IRS 'One-Participant 401(k) Plans' page and Form 5500-EZ instructions.
Connections (2)
▸Solo 401(k) (owner-only plan) is a one-owner version of 401(k) planLaw or rule (2026)
How they connect
A solo 401(k) follows the same tax-code section and dollar limits as a company 401(k), but covers only an owner and spouse. With no other employees there's no nondiscrimination testing, so the owner can stack employee deferrals and employer profit-sharing up to the $72,000 cap.
When it applies
Made practical by the 2001 EGTRRA law, effective 2002, which stopped deferrals from counting against the employer's 25% deduction limit.
The rule
The IRS 'One-Participant 401(k) Plans' page says it is not a new plan type but a traditional 401(k) covering only the owner.
Watch out for
When a part-time hire becomes eligible under SECURE's long-term part-time rules, and what that does to a solo plan, can be unclear.
▸Mega-backdoor Roth (after-tax 401(k) to Roth) can be built into Solo 401(k) (owner-only plan)Depends on you
How they connect
A solo 401(k) has no other employees, so the nondiscrimination tests that limit after-tax contributions in company plans don't apply. With a plan document allowing after-tax contributions and in-plan conversions, an owner can fill the $72,000 cap with Roth money, limited by self-employment earnings.
When it applies
Offered by some custom-document plan providers; most free brokerage solo 401(k)s don't allow after-tax contributions.
How sure?
IRC Sec. 415(c) total limit and IRS Notice 2014-54; the plan's adoption agreement shows whether after-tax contributions are permitted.
Watch out for
Depends on you: whether the setup cost is worth it, and whether pre-tax profit-sharing beats Roth money, are judgment calls for your CPA.