Can an S Corp Have a 401(k) Plan?

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 13, 2022

The IRS recognized that an S Corporation can sponsor a solo 401(k), also called an individual 401(k). The caveat is that there must be no full-time common law employees and you and any other owner must have at least 2% of the outstanding company stock.

S Corp and 401(k) Plan FAQs

What is a 401(k) plan?

A 401(k) plan is a retirement plan offered by an employer designed to help employees save for retirement.

Can an S Corp Have a 401(k) Plan?

The IRS recognized that an S Corporation can sponsor a solo 401(k), also called an individual 401(k). However, there can be no full-time employees at the company, and the owners must own at least 2% of company stock.

What is the difference between a Roth 401(k) and traditional 401(k)?

With a Roth 401(k), taxes are paid as money is put into the retirement account. With a traditional 401(k), taxes are paid as money is taken out.

Are there other retirement savings plans other than a 401(k) plan?

Alternatives to 401(k) plans include traditional IRAs, Roth IRAs, pension plans (if your employer offers one), and 403(b) retirement plans for employees of non-profit organizations.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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