As a leading provider of retirement plan services, Legend can assist your organization
with the design, implementation and maintenance of a Personal §401(k) plan.
Eligible Employers
Businesses that employ only owners and their spouses
(including C Corporations, S Corporations, partnerships and sole proprietorships)
Deadline to Establish
December 31st of the year in which the first contribution is made
Eligible Employees
Business owners and spouses
Elective Deferral Limit
The lesser of 100% of the participant’s compensation or $17,000 in 2012
Over Age 50 Catch-up
$5,500 in 2012
Employer Contributions
Maximum contribution of 25% of participant's salary with annual additions maximum
(employer and employee contributions combined) capped at $50,000 in 2012
($55,500 with Over Age 50 Catch-Up)
Taxation
Pre-tax contributions are taxed when paid out to the participant
Roth contributions are after-tax and Roth distributions are tax-free if paid out as qualified
distributions (after five years have elapsed since the first Roth contribution was made
and the participant has attained age 59½). Otherwise, a 10% penalty may apply to earnings.
Loans1
Participants may take a loan of one half of their account value up to $50,000
Hardship Distributions
Participants may take distributions
if the participant meets guidelines established under §401(k) rules
In-Service Distributions
Participants may take distributions of elective deferrals at attainment of age 59½
Participants may take distributions from amounts rolled over
from other eligible retirement accounts at any time
Participants may take distributions from employer contributions
that have been in the plan for five years
If the plan includes a Roth §401(k) option, amounts eligible to be distributed as discussed above may be rolled into a Roth §401(k) account.
A tax liability will be incurred for the taxable year the assets were removed from the Traditional §401(k) account.
Rollovers into Plan
Participants may rollover distributions from other eligible retirement accounts into the plan
Premature Penalty
Applicable on distributions taken prior to age 59½
Reporting Requirements
Form 5500EZ is required annually after assets in this plan and any other
qualified plan maintained by the employer (excluding SEP IRAs) exceed $250,000
Nondiscrimination Testing
No testing is required because there are no common law employees
Required Minimum Distributions
A participant must begin taking distributions at the attainment of age 70½. The first
minimum distribution must be taken by April 1st of the year following the year
containing this triggering event.
1Defaulting on a loan from a retirement plan constitutes a distribution from that plan.
Loans may affect cash values and death benefits.
Distributions from a retirement plan may be subject to federal income tax in the year
distributed and may incur an additional 10% penalty if the participant is under age 59½.
Legend Equities Corporation and its affiliates do not provide tax information or advice.