• Home
• About PATA
  • Bio
  • What is a TPA?
  • Partner with PATA
• Reasons to Have a Qualified Plan
• Fiduciary Responsibility
  • ERISA Bonding
  • 404c
• Types of Plans
  • Traditional 401K Plan
  • Solo 401K Plan
  • Safe Harbor 401K Plan
  • Profit Sharing Plan
  • Defined Benefit Plan
  • Solo vs. Sep
• Contribution Deadlines
• Fees / Online Payments
• Documents and Amendments
• Pension Limits
• Plan Distributions
  • Distribution
  • Rollover Rules
  • RMD
  • Automatic Rollover
• Pension Loans
• Links
• Newsletter (Provided by IRS)
• Contact PATA
•  

Solo 401(k) Plan vs. SEP 

Just a few facts about the differences between the Solo plan and the SEP

Main Differences…  The SOLO has a larger contribution (due to the ability to defer income) ... and the SOLO allows for loans from the plan 

Setup Cost:  Yes, there is a cost to establishing a Solo.  It is a one-time fee payable to PATA …BUT it is a 100% deductible business expense!.  Year 2 of the plan and every year to follow that you use PATA’s document there is an annual Document Usage Fee of $150.  As far as I know there is no cost to establish a SEP.  An employer simply completes form 5305-SEP and it is done.  But beware there still are requirements to follow regarding the SEP.   

Contribution limits: Solos and SEPs have the same “employer” contribution limits.  If you are self employed there is a formula to use to calculate the contribution but in the end the limit is 25% of your income.   But wait, what makes the Solo better?  In addition to the employer contribution the participant of the plan can also defer income which will increase the amount that can be put into the Solo.  The IRS has a limit which is called the 402g limit and it works like this:  If you are under the age of 50 you can defer any amount you want up to $16,500.  If you are 50 or older you are allowed to defer the $16,500 plus an additional “Catch-up” contribution of $5,500 for a total of $22,000.  The SEP does not allow you to defer income.   

Annual administration cost: Ok, there is no annual administration cost with a SEP.  There is no regulatory tax return to file meaning that you do not have to hire any one to do any kind of “administration”.  But then again you, being the employer, are required to keep your SEP compliant with the law.  The Solo does require a regulatory tax return to be filed it’s called a form 5500.  But the IRS gives you a break.  The break is that there is no tax return required until the assets of the plan are $250,000 or greater.  NO return, no need to hire someone  (like PATA) to perform an annual trust accounting and prepare the form 5500

Loans: SEPs  no… Solo plans yes.  You can not take a loan from a SEP but you can from a Solo 

If you should have any questions at all please do not hesitate to email PATA