If you have a Solo 401(k) and employees other than your co-owners, business partners, or spouses meet the eligibility requirements to participate in the plan, you can continue your 401(k) plan with Guideline. However, your plan would need to transition to a standard 401(k).

This transition marks an important stage in your business's growth, and understanding the changes involved will help provide a smooth transition for you and your employees. Here are answers to common questions about moving from a Solo 401(k) to a standard plan.

When you add an employee to your roster, the system will notify Guideline so we can confirm your plan is configured correctly.

A task will then be published on your dashboard to confirm your employee's status (owner, business partner, spouse, or common-law employee). Please complete this task as soon as possible, so we can adjust your account as needed.

Note that any family members other than spouses are common law employees unless they are also part-owners.

Here’s what to expect after completing the task based on the employee type:

If you do not complete the task prior to the employee becoming eligible, we will automatically upgrade your plan to our Core tier within 30 days of their eligibility.

Thirty days after a common-law employee becomes eligible to participate in the plan, we will upgrade your plan to a standard 401(k) plan in our Core pricing tier.

Because a Solo 401(k) is meant for self-employed owners or similar business types, your plan must be upgraded to a standard 401(k) once common-law employees are eligible to participate.

If you would like to avoid transitioning, you can set eligibility requirements that employees must meet before they are eligible for your standard 401(k) plan. For instance, if your plan has eligibility requirements less than 12 months of service or age 21, you can increase them to these maximums. However, this must be done before the common-law employee meets the eligibility requirements. Learn more about allowable eligibility requirements here.

It’s important to note that any eligibility requirements must be established before an employee becomes eligible to participate. Feel free to contact our Employer Support team to implement these changes to your plan.

Transitioning from a Solo 401(k) to a standard 401(k) entails several changes to your plan's cost structure, features, and regulatory obligations.

As your plan evolves into a standard 401(k), the fee structure will adjust to our Core tier to accommodate the complexities of managing a plan with employees. Detailed information regarding Guideline's standard 401(k) pricing can be found here.

Reviewing this information will help you anticipate the change in expenses associated with your retirement plan.

As a Solo 401(k), your plan is exempt from certain IRS non-discrimination tests solely due to who is included in the plan. Once your plan covers a common-law employee, it will be subject to testing requirements to ensure that the plan benefits all employees fairly.

Failing compliance testing can have consequences for your plan and its participants. As a result, you might consider adopting a safe harbor 401(k) plan design. Safe harbor plans are generally exempt from most annual non-discrimination testing. It is important to consider this type of change once you anticipate hiring a common-law employee, as there are timing requirements for adding a safe harbor feature. Learn about the benefits and features of Safe Harbor 401(k) plans here.

Once your plan moves from a Solo 401(k) to a standard 401(k) your Service Agreement with Guideline will be updated. This updated agreement will reflect the changes in services, pricing, and regulatory requirements associated with your new plan type.

You will be able to review the amendment to your Service Agreement in your Resource Library, accessible through your Guideline sponsor dashboard.

To customize your standard 401(k) plan design, such as establishing an employer match, changing vesting schedules, adding employee eligibility requirements, or adopting a safe harbor plan to potentially bypass compliance testing, please reach out to our Employer Support team.