Solo 401(k)

This plan type provides flexibility and the highest savings potential at a low cost. Save using salary deferrals and employer contributions (limits provided are for 2025 and indexed for inflation):

• Profit sharing contribution are employer contributions which can be as much as 25% of compensation⁷ for each participant. Contributions are pre-tax and are eligible for tax deductions. Compensation is limited to $350,000 when calculating profit-sharing contributions.
• Salary deferrals are employee contributions that can be deferred as traditional 401(k) (pretax), Roth 401(k) (after-tax), or both. The most a participant can defer in salary deferrals is limited to the lesser of 100% of compensation or:
• $23,500 if under age 50.
• $31,000 if age 50 -59 (includes, $7,500 in catch-up contributions).
• $34,750 if ages 60 – 63. Beginning January 1, 2025, higher catch-up contribution up to $11,250 is permitted for these participants. Contributions may begin January 1 of the year the participant turns 60 and must cease by December 31 of the year they turn 63.
• $31,000 if age 64+ (includes, $7,500 in catch-up contributions).

Combined salary deferral and employer contributions cannot exceed $70,000 for participants under age 50. This amount does not include catch-up contributions. Catch-up contributions may begin January the year the participant turns 50 years.

Create drawdown strategies with tax-free assets. Like a Roth IRA, contributed amounts are already taxed, but unlike the Roth IRA, the employee has greater savings potential and no eligibility requirements. Tax-free earnings are accessible five years from the first contribution and when a triggering event occurs, such as age 59½, disability, or death.

We understand that life’s unexpected events can arise, and to support you through those times, the Invesco Solo 401(k) plan offers access to your retirement savings while you are saving for retirement. Before taking a distribution from your account, consult with your financial professional to carefully evaluate the impact on how the options below affect your financial decision.

• Loans: You may borrow up to 50% of your retirement account balance or $50,000, whichever is less. The minimum loan amount is $1,000. 
• Rollover dollars: You may access deposits from other retirement plans at any time unless a loan is outstanding
• Attainment of normal retirement: At Age 55.
• Financial Hardship Distributions: Employee salary deferrals and employer contributions may be accessed prior to age 59½ due to financial hardship. You will be subject to ordinary income taxes and a 10% premature distribution penalty.

The early distribution penalty of 10% is waived:

• At Age 59 ½.
• For Qualified natural disaster.
• For Qualified Birth and Adoption. 

A Solo 401(k) plan is a defined contribution plan designed for the sole business owner with no employees other than a spouse. Legal entities, such as C corporations, S corporations, partnerships, and sole proprietorships, are permitted to establish a Solo 401(k) plan.

The 500-hour requirement is a per-year requirement for W-2 wage employees. For plan years beginning on or after January 1, 2025, the LTPT 500-hour eligibility requirement is satisfied with two prior consecutive years of service with at least 500 hours (but no more than 1,000 hours) each year. As a result, employees who are at least age 21 who meet this 500-hour requirement for each of two prior consecutive years must be permitted to make salary deferrals into the plan.

For Example: If a W-2 employee who is at least age 21 as of January 1, 2025, worked between 500 and 1000 hours in 2023, and also worked between 500 and 1,000 hours in 2024, this employee is eligible to participate in the plan and make salary deferral contributions starting January 1, 2025.

According to the IRS, an employer’s good faith compliance with this new requirement will suffice until such time that the IRS issues further rules. 

If any non-spouse W-2 employee is LTPT based on the criteria described above, even if they elect NOT to contribute salary deferrals to the plan, this ostensibly subjects the plan to coverage under ERISA, solely by virtue of the employee’s new eligibility to participate. ERISA is a federal law that requires employer plan sponsors to comply with certain fiduciary obligations, and imposes requirements for bonding, fee disclosures, and Form 5500 filings, among other things. A plan’s compliance with ERISA is ultimately the responsibility of the sponsoring employer.

Understanding and complying with ERISA requirements is the responsibility of the sponsoring employer, not Invesco (however, Invesco does provide certain limited support for ERISA disclosure obligations). Please also note, the Solo 401(k) is not designed to support ERISA plans; it is intended for owners and spouses only (and thus exempt from ERISA). 

Invesco’s intent is to amend the Invesco Solo 401(k) Plan to exclude LTPT employees from receiving employer contributions, and to provide for only an employee salary deferral option for LTPT employees. However, since final IRS regulations are still pending, final plan amendments for your plan will depend on further IRS guidance, as referenced above. While we work through this process, employer contributions are not required. 

Contract employees whose services are paid for and reported on a Form 1099 and do not receive W-2 wages are not considered LTPT employees.

An individual 401(k) and a Solo 401(k) are one and the same. This type of plan is designed for the one-person employer and their spouse. Other common names associated with this plan include Solo-k, Uni-k, Single k, and One-participant k.

While working with a third-party administrator (TPA) is not required, should you choose to utilize the support of a TPA, you may receive up to $500 per year in a tax credit for startup costs for a period of three years. Invesco is not a TPA, but it does provide basic recordkeeping services, applicable plan documents and materials, and certain regulatory notices applicable to your plan. 

Filing IRS Form 5500 is required when plan assets reach $250,000 across all qualified retirement plans. Invesco does not provide IRS Form 5500 support. Please contact your qualified tax professional for assistance.

The Invesco Solo 401(k) plan allows Roth contributions to be made. Unlike a Roth IRA, a Roth 401(k) has higher contribution limits and no income eligibility requirements.