Entrust Individual 401k Plan

Download the Individual K info Sheet (4 pages)

Entrust Individual K Plan

If you are self employed or small business owner and really care about your future, the Entrust Freedom Individual K Plan is one of the most powerful tools you can possess.  The Freedom K is a qualified plan for those who own or run a small business which has no employees. The Freedom k was designed exclusively for owner-only and small businesses with no employees or if the employees fall outside of certain guidelines (works less than 1,000 hours or are under 21). One of the key benefits of an Individual K Plan is that a husband and wife can be covered under one plan, so there is no need for two Individual K plans.   This makes recording keeping much easier.

A qualified plan is different from an IRA with many additional benefits.There is additional paperwork with a Freedom K that Entrust will assist you in setting up your plan.  Please contact an Entrust specialist.

Benefits of the Freedom K Plan

• Invest into real estate, private stocks, precious metals/gold, notes/mortgages and many other investments
• Existing retirement funds including existing IRAs can be transferred into this new plan
• Checkbook Control over fund asset if you need feature or have Entrust act as your third party administrator.  A Freedom K can offer offers the same abilities as the checkbook LLC, but without having to hire a custodian or the added expense to create an LLC.
• Largest Contribution Amount - Of all retirement plans, the Individual(k) allows you to contribute the most money to your retirement plan.

Employee Portion $16,500 for 2009

Employer Portion 25% of Earning up to max combined contribution of $49,000

Additional Catch up Contribution if over 50 years old $5,500

• Largest Tax Deductions - As an employer, up to 25% of your contribution is tax deductible, for a maximum amount of up to 25% of your compensation. Elective deferrals can be excluded from the employee’s income for federal income tax purposes. Since you don’t pay taxes on any investment earnings until they are withdrawn, you have tax-deferred (or tax-free with the Roth) growth.
• Increased Retirement Income - Because the Individual (k) plan allows you to contribute more than other plans, you have the option of saving more for retirement. If you are employed and compensated by the business, your spouse may also participate in the plan.
• Due to a change in 2006, Roth contributions are now allowed in an Individual (k). Profits are generally tax-free, provided that distributions are not taken prior to 59 ½ years of age. If you consider the added contribution limits of the Individual (k) with a Roth option, coupled with the potential to earn more with a self-directed account from Entrust, the result is a very powerful, wealth-generating account.  Your Freedom K documents will be prepared to allow for a Roth subaccount which can accept contributions of $16,500 per year or $22,000 if you are over age 50. Roth funds grow tax free and aren’t taxed when distributed later in retirement years. Unlike a Roth IRA, the Designated Roth Account of a Freedom K doesn’t place restrictions on those with high incomes.

• Reduced Business Expenses- Take advantage of lower administration fees than a traditional 401(k) or profit sharing plan. In addition, if your plan owns a “C” corporation, you may have the ability to draw a reasonable salary for the service you provide to the business entity.
• Non-taxable Loans - You can take a non-taxable loan from the account, provided the funds are repaid within five years and at a reasonable interest rate. Take a loan up to $50,000 (or 50% of account value) for any reason. The loan must repaid over a term of up to 5 years.
• Retirement accounts can be UBIT/UBTI/UDFI exempt and do not pay income or gains taxes.  That is not the case when an IRA owns real estate that carries mortgage debt, UBIT can apply.
• Tax Returns only need to be filed for an Entrust Indy K Plan if the plan assets exceed $250,000.

How to get started with a Freedom K Plan?  To set up a Freedom K Plan, please contact one of our knowledgeable retirement associates.  To the started the process, Entrust will need:

1.      Name of your company

2.      Name of the Trustees

3.      Name of the Participants, including  Social Security Number, Date of Birth and home address

4.      Company Address

5.      Type of Business

Entrust will then help compile the plan documents needed to start your 401(k). A plan must be established by December 31^st to be eligible to make contributions for that tax year (i.e. to make contributions for 2009, the plan must be setup by year end). 

Contributions for the plan must be made based on where the business owner is incorporated or not.  If the business owner is unincorporated (Schedule C on form 1040), the contributions for the Employee and the Employer are due by the due date of the tax return.If the business is incorporated, the employee contribution is due by January 31 of the following year and the employer contribution is due by the due date of the tax return including extensions.

An Indy K plan can be a powerful tool for small business owners.  Between the loan provision (note: No IRAs have a loan provision to the IRA Owner) and the Roth feature (many individuals are not allowed to make Roth contribution because of their income), and the highest contribution limits of any plan, the Freedom K is a made for savvy investors.