Spousal Participation
Jeff Nabers avatar
Written by Jeff Nabers
Updated over a week ago

A spouse is eligible to participate in your plan if he or she is an employee of the company that adopts the plan.

For those of you that remember the eligibility requirements for the Solo 401(k) saying something about not having employees, here’s an explanation:

Eligibility for a Solo 401(k) requires there are no full-time employees of the company other than owners, partners and their spouses. Independent contractors and part time employees (who work under 1000 hours per year) are not considered full-time employees.

If your spouse is an employee of the company that adopts your Solo 401(k) plan, he or she is considered an “owner-employee” since the two of you are married.

Here’s an example. Let’s say Jill has a small vitamin company called “Jill’s Pills”. Jill employs her husband, Ted, to do bookkeeping for the company. Ted can participate in the Solo 401(k) plan created for Jill’s Pills.

Another common occurrence is a husband and wife both owning and operating a business together.

Here are some of the benefits of having a spouse participate in your plan:

  • An eligible participant can make contributions to the plan from income received from the adopting employer.

  • Since your spouse will have his or her own set of contribution limits, spousal participation effectively doubles the limits on contributions to the plan.

  • A spousal participant can also transfer eligible existing retirement funds into the plan.

  • Spousal participation also serves to eliminate the costs of having to create and maintain multiple plans.

Once again, as long as your spouse is an employee of the company that adopts the plan, he or she can participate. Your spouse does not necessarily need to be an owner of the company. Further, there are no changes that need to be made to the plan to allow for this, and there are no additional fees charged for the additional participant.

Further, there is no additional paperwork that needs to be completed for the addition of the participant. The administrator (your company) has the option to either:

1. set up a separate bank account in the name of the trust for the additional participant’s contributions and/or rollovers or
 2. use the same bank account and keep track of what funds belong to whom via an accounting method of your choice

The same two options apply when opening other types of accounts in the name of the 401k trust, including brokerage accounts.

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