The SBO-401(k) can only be adopted by businesses in which only the business's owners are eligible participants in the plan. The ideal candidate for the SBO-401(k) is an employer who has employees, they do not satisfy both criteria for being included in the plan. To be eligible, a person must work at least 1,000 hours each year, but there may be age restrictions. To be sure, you should check the provisions of the SBO-401(k) plan document that you intend to adopt. Most of these documents include a hard-coded definition of "eligible employee".


Note: Bear in mind that if you have other businesses, you may also need to take those businesses into consideration. Ownership in other businesses may affect your eligibility to adopt a SBO-401(k) plan.

To learn more, read 401(k) Plans For The Small-Business Owner and Plans The Small Employer Can Establish.

This question was answered by Denise Appleby
(Contact Denise)

  1. How is an SBO-401(k) set up?

    Learn what a Small Business Owner 401(k) plan is and who is eligible to establish one. Find out what the IRS requires of ... Read Answer >>
  2. Can an employer adopt a different type of retirement plan for each employee?

    Generally, any qualified retirement plan or IRA-based plan adopted by an employer must cover all eligible employees. Failure ... Read Answer >>
  3. Who is eligible to obtain a Simplified Employee Pension (SEP) IRA?

    Learn if an individual may contribute to a Simplified Employee Pension IRA when his or her employer offers a plan and how ... Read Answer >>
  4. I am 61 years old and would like to contribute to my employer's 401(k) plan. Is there ...

    There is no age limit. As long as you are still employed by the company that sponsors the 401(k) plan, you may participate ... Read Answer >>
  5. I am only 17 years old. I don't have a job or pay taxes. Can I contribute to an IRA? ...

    You must have earned income (eligible compensation) to be eligible to contribute to a Roth IRA. Individuals who are eligible ... Read Answer >>
Related Articles
  1. Retirement

    Introduction To SIMPLE 401(k) Plans

    Learn about the features and benefits of the plan that is a cross between a SIMPLE IRA and a traditional 401(k) plan.
  2. Taxes

    Tax Credit For Plan Expenses Incurred By Small Businesses

    Determine whether your business is eligible to claim a tax credit for establishing a retirement plan.
  3. Small Business

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  4. Retirement

    SIMPLE IRA Vs SIMPLE 401(k) Plans

    See the differences that may cause an employer to choose one plan over the other.
  5. Financial Advisor

    SEP vs. Keogh Plans: Which is Right for You?

    SEP and Keogh plans each have their pros and cons. Here's how to choose which one is right for you.
  6. Retirement

    This Is Why Your Employer Should Offer a 401(k)

    Understand the unique benefits that come with a small business offering a retirement savings plan such as a 401(k) to current and future employees.
  7. Retirement

    The Basics Of A 401(k) Retirement Plan

    This plan has become one of the most popular retirement options. Find out why.
  8. Retirement

    10 Providers With 401(k) Plans for Small Employers

    If you're a small business that has steered clear of a 401(k) plan for your employees, find out how these providers can make it easier.
  1. Eligible Rollover Distribution

    A distribution from an IRA, qualified plan, 403(b) plan or 457 ...
  2. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  3. Business Plan

    A written document that describes in detail how a new business ...

    A retirement plan that can be used by most small businesses with ...
  5. IRS Publication 560: Retirement Plans for Small Business (SEP, SIMPLE and Qualified ...

    A document published by the Internal Revenue Service (IRS) that ...
  6. Active Participant Status

    Active-participant status is a reference to an individual's participation ...
Hot Definitions
  1. Assets Under Management - AUM

    The market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) is looked ...
  2. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official ...
  3. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  4. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
  5. Passive Management

    A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. ...
  6. Series 7

    A general securities registered representative license administered by the Financial Industry Regulatory Authority (FINRA) ...
Trading Center