Hi everyone,
DH is the sole employee of a C corp, and will be for at least the next 6 months (if not a year or longer) until he hires a postdoc. Seeing as it is free (for us) to open a solo 401k at Vanguard, I was hoping to go that route and funnel ~$40k/year into it ($19k into the Roth 401k option and $20k as an employer contribution).
As I was running things by our accountant for the C corp, she thinks that it's not possible/illegal to drop a solo 401k either just before or after hiring someone. She quotes: "No matter what the 401k plan is called by a plan provider, it must meet the rules of the Internal Revenue Code. If you hire employees and they meet the plan eligibility requirements, you must include them in the plan and their elective deferrals will be subject to nondiscrimination testing." In other words she says, despite its name, a solo 401k does apply to other employees, and she thinks it's illegal to drop it just because you're hiring.
I feel like I've read/seen a bunch of people on here drop their solo 401ks when hiring an employee. Am I wrong about this?
I'm not even sure if they're going to offer the new employee retirement benefits anyway (since that's not typical for the industry), but we may offer them a SEP option if they're big savers and they're interested...
Super frustrating since I thought I had it all in the bag until now.