A 401k For Owner-Only Businesses

A Single K is designed for:

• Sole Proprietorships
• One Person Corporations
• Corporations Without Full-Time Employees
• Non-Profits Without Full-Time Employees
• Partnerships
• Family Businesses
Because contributions may be made by both the participant and employer (and they are often one and the same), a Single K may present a much higher total savings opportunity than a SEP or Profit Sharing plan. Employer Fact Sheet E Mail us to obtain a Single K employer fact sheet. Rules, features, and permitted plan designs are summarized within the guide. It is our pleasure to support you further during your Single K implementation. Your plan can be installed and operable in one day, upon request. Plan Features

Eligibility

A Single K may be established by either incorporated or non-incorporated businesses. This includes sole proprietorships, partnerships, one person corporations, and certain other corporations. Generally, a corporation where all employees (except for the owner) fall under one or more of these categories may establish a Single K and exclude their employees from participation.
• Employees under age 21
• Employees who will have worked less than 1,000 hours
• Employees who work for a union
• Employees who are non-resident aliens with no US source income.
Note: that the employer may set less restrictive eligibility provisions.
Also, the employer may elect entry dates of January 1 and July 1, so that employees who are age 21 and full time would have to wait until that next entry to begin participation.
Compensation Compensation is generally defined as W2 income or earned income from self-employment. It is important to consult with a CPA to determine your earned income. Compensation is used for multiple purposes under qualified retirement plans. Within a Single K, it determines the amount of contributions that the employee and employer can make to the plan. Although a qualified plan may adopt any reasonable definition of compensation for purposes of making elective deferrals or allocating contributions, Tax Code §414(s) requirements dictate that the definition be nondiscriminatory. In your Single K plan document, you will be able to make a selection, within parameters, to encompass the way in which you receive income. Loans Both Option 1 and Option 2 include a loan feature for your Single K. A participant who elects to borrow from their Single K may take a loan, up to 50% of their vested account value to a maximum of $50,000. While interest rates vary by plan, the rate most often used is the prime rate plus one percent or two percent. The rate that is specific to your plan is detailed in your plan document and may also be obtained through your service center. Loan principal plus interest is repaid by the participant to their own Single K account via payroll.

Example Loan for Mary Smith, a Sole Proprietor

Single K Account Value	$80,000
Maximum Loan Permitted	$40,000
Loan Interest Rate – Paid Back to Mary’s Account	9.5%
Loan Origination Fee	$100
Loan Annual Fee	$50

Not all Single K products offer a loan feature; however our programs do extend this key benefit to participants who may need capital resources during their savings years. There are also certain disadvantages of taking a loan from a Single K account. Effecting a loan means liquidating shares (as necessary for the amount of the loan), leaving a much small remaining account balance. The left over value will earn less interest, dividends, and experience smaller gains than the former whole account. Further, in the event of separation of service, the unpaid loan balance becomes taxable as income and is also assessed a 10% penalty for the year in which separation occurred. Rollovers Rollovers are permitted into your Single K, from each of the following:
• Traditional IRA
• Rollover IRA
• SEP
• SARSEP
• SIMPLE IRAs (after 2 years)
• Profit Sharing Plans
• Pension Plans
• Defined Benefit Plans
• 403 (b)
• Governmental 457(b)
• Single K
It is important to check with us, prior to initiating a rollover into your Single K account. Also, you should contact your current account provider to review any fees or restrictions that may apply in the distribution and rollover process. Contribution Limits Significant amounts can be saved in a Single K each year, by combining elective deferrals and employer deposits to your retirement account. Single K plans may permit higher contributions than a SEP. Contributions to a SEP, from the employer, are limited to 25% of your compensation. With a Single K, on the other hand, you can contribute up to $15,500 plus 25% of your compensation (in 2008), not to exceed $46,000 for 2008. You can make an extra $5,000 catch-up contribution if you attain age 50 or over by that year end. Contributions may not exceed the total amount of your business income; however, you may save up to 100% of your pay or earned income. The overall employee plus employer maximum dollar amount changes each year, and in 2008, the maximum contribution may not exceed the lesser of 100% of income up to $46,000 (or $51,000 if age 50 or over). If you have an active 401k through another employer, and also have income outside of that employer, then a Single K may still be right for you. 401k deferrals in your Single K are offset by those that have been made to your employer sponsored 401k plan. Single K contributions for a sole-proprietor of an unincorporated business are slightly lower than the above amount, because the definition of compensation changes. For unincorporated businesses, compensation is net taxable business income minus half of self-employment taxes minus employer contributions. Compensation, in this case, is also known as earned income. The result in this case is that the employer contribution is reduced to 20% of net earnings (modified net profit).

Example Contribution for Mary Smith, a Sole Proprietor

Compensation	$100,000
Age	52
Maximum Deferral Amount	$15,500
Catch-up Amount	$5,000
Employer Contribution	$20,000
Total Contribution to Mary’s Single K	$40,500

Investment Options & Expenses
You have access to two Single K investment platforms, each with differing fund options and accompanying fee schedules.
Option 1 – One Mutual Fund Family

Investment Options

Option 1 includes a spectrum of funds, within a complete range of investment categories, from one fund family. Within this single family of funds, a participant may select from options that encompassing diverse investment strategies and management styles. Our team will support a participant by offering model portfolio designs consistent with the individual’s investment time horizon and intended level of risk. Investing in a single fund family can have economic benefits. The specific benefit, known as breakpoint investing, applies for a certain share class and is dependent upon the total amount invested (or intended to be invested in a set period of time) with that fund family. Even within a single fund family, an investor commonly does have the opportunity to diverse asset classes and investment categories through selection among an array of choices. Important details including the expenses, risks of investing, and benefits of breakpoint investing are contained in the prospectus for each fund. A prospectus must be reviewed prior to investing. For fund families available under Option 1, you can request a complete list by This e-mail address is being protected from spam bots, you need JavaScript enabled to view it  .

Expenses for Option 1

Installation	$0
Annual Base Fee	$0
Per Participant Fee	$15
Custodian fee	0%
Asset Management Fee	0%

Total Annual Business Expense = $0 Total Annual Participant Expense = $15
Note: The business may elect to pay the per participant fee, or that fee may be paid by the participant.
Option 2 – Multiple Mutual Fund Families

Investment Options

Option 2 offers many mutual fund families under the American Single K. This open-architecture design permits each participant to select from a wider spectrum of funds, from many fund families. This design offers, to the employer, a custom selection from a universe of over 5,000+ fund options. Under Option 2, you create your own investment platform. We provide all fund research, prospectuses, and brochures during your review. The Fund Family List includes a wide spectrum of mutual fund families encompassing diverse investment categories, management styles, and approaches to mutual fund design. This e-mail address is being protected from spam bots, you need JavaScript enabled to view it   to request a complete Fund Family List for mutual fund families that have a selling agreement with MML Investors Services, LLC. We understand that you may have questions related to the number of funds and specific investment categories to offer in your program. The FAQ – Investment Options section of this site addresses common fiduciary interests that arise during the implementation of your investment platform.

Expenses for Option 2

Installation (one-time)	$150
Annual Base Fee	$250
Per Participant Fee	$0
Custodian fee	.10%
Asset Management Fee	0%

Total Annual Business Expense = $250 Total Annual Participant Expense = Mutual Fund Expense Ratio + Distributions (If Any) Note: There is no minimum requirement for the custodian fee amount. For large plans, there is a maximum of $1,250, annually. An administrator must file IRS Tax Form 5500 if plan assets reach $250,000 of more. With Option 2, there is no additional fee for the record keeper’s completion of your 5500. This e-mail address is being protected from spam bots, you need JavaScript enabled to view it   to begin saving in your Single K program. We look forward to supporting you in the easy installation of your new retirement plan.

Remember the key benefits to your Single K program:

• Contributions are tax deductible
• Earnings accumulate on a tax-deferred basis
• Loans are available
• Rollovers are permitted
Further, your Single K will cost just $15 per participant annually (Option 1), and upholds administrative simplicity without testing or tax filing below $250,000 in assets. In addition to the annual administration fee, your Single K funds do have an expense ratio as detailed by prospectus. Maintaining your Single is effortless in future years. For employers, we offer web based deposits, payroll integration, and compliance support through the record keeping services. For participants, we provide online retirement planning tools, portfolio models, and our extensive knowledge and experience to help you capitalize on the Single K savings opportunity.