A Single K plan is a 401(k) plan designed especially for owners and immediate family members (spouses, owner’s parents, children and grandchildren) regardless if your business is incorporated or not.
This plan type offers both employer and employee contributions. The maximum amount permitted is $53,000 for 2016. Employer contributions are tax-deductible up to 25% of eligible payroll (20% for self-employed individuals) and have the potential to grow tax deferred. Employee contributions can be contributed either on a pretax or Roth after-tax basis or any combination of both up to $18,000 for 2016. In addition, just like large employer sponsored 401(k) plans, a catch-up provision is available for participants at age 50 to contribute an additional $6,000 to supplement their retirement savings. These participants have the potential to save a maximum of $59,000 for 2016.
Roth investing allows participants to save in their retirement plan by using income that has already been taxed. These savings have the potential to grow tax deferred and are tax free upon withdrawal for qualified distributions1 and must have been held for at least five years. Allocating a portion of your retirement savings to Roth provides a unique opportunity for participants to diversify their retirement savings by providing tax free distributions and the ability to potentially hedge against years where they may be subject to higher taxes.
Other compelling features of the OppenheimerFunds Single K include low cost—there’s no setup fee or annual plan administrative charges2—they’re simple to administer with no government reporting required,2 and this plan type also allows employees access to their savings via a hardship withdrawal or loan. New plans must be established by the plan’s year end, generally, December 31 for calendar year-end plans.
Call your financial advisor today to explore if a profit-sharing plan is right for you. To learn more access Retirement Plans for Small Businesses Employer Guide.
1Age 59 ½, death, disability or separation of service, after age 55.
2There is a low annual maintenance fee per participant of $30. The fee will be waived if the total investments in Oppenheimer funds retirement and/or nonretirement accounts, excluding OppenheimerFunds direct-sold 529 plans, is $50,000 or more.
3Form 5500 required for ERISA “one-participant” plans if an owner’s parents, children or grandchildren are employed, if plan assets reach $250,000 or more across all qualified plans or if the company is part of a controlled group.