MARK KOHLERMain Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, LLC · Owner at Main Street Professionals, LLC

When You're Allowed to Use a Solo 401k as Business Owner

3 Mar 2026 · 1 min

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A Solo 401(k) stays valid only if you have no full-time employees (20+ hours weekly) for a full year, or no part-time employees for three years. Family members don't count. Once an employee hits that anniversary, you must roll the account to an IRA or switch to a group plan.

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You cannot have a solo 401k. If you have a full time employee that's now had an anniversary date of one year working an average of 20 hours a week or more then you cannot play in the solo that year. You could play in a solo the first year while they're just kind of starting but then next year when they hit their one year anniversary you're going to have to shut down that 401k which is okay roll it out to an IRA and then go with the group 401k a safe harbor which is great too but the solo is only going to be okay up until that anniversary date. Now if your employee quits before they hit their anniversary date or you them on the 364th day you're good. Now you can't have a part time employee that has their three year anniversary. This does not involve your family or kids. This is a third party employee. So three year anniversary of a part time one year anniversary of a full time you're out.