Practical Setup Guides for Self-Employed Plans

Before adopting a specific self-employed retirement structure, consult Form 3998, “Choosing a Retirement Solution for Your Small Business”, which provides the IRS’s official comparative overview of small business retirement options. Once you have selected the appropriate plan, you must execute the practical, step-by-step setup protocols below to establish the plan in strict compliance with federal tax regulations.

Solo 401(k) Setup Protocol

Establishing an individual or Solo 401(k) requires active administrative steps to secure tax-qualified status:

1.

Secure an Employer Identification Number (EIN): You cannot use your personal Social Security Number to maintain a Solo 401(k) trust. You must obtain a dedicated business EIN from the IRS.

2.

Adopt the Plan Document: Sign a formal Adoption Agreement and plan document. If you use a standard brokerage prototype plan (offered for free by Schwab, Fidelity, or Vanguard), you will be restricted to their investment menu and barred from executing after-tax Mega Backdoor contributions. To trade options, purchase real estate, or run a Mega Backdoor Roth sleeve, you must purchase a custom qualified plan document from a specialized document provider (such as MySolo401k or IRA Financial Group).

3.

Establish the Trust and Accounts: Establish the plan trust. Open a dedicated trust checking account or trust brokerage account using the plan’s EIN (with yourself designated as the trustee).

4.

Execute by the Filing Deadline: Under current SECURE 2.0 rules, you have until your business tax filing deadline, including extensions, to establish the plan and make both employee elective deferrals and employer non-elective contributions for the preceding tax year.

5.

Form 5500-EZ Annual Filing: Once the total assets across all your Solo 401(k) plans exceed $250,000 at the end of any calendar year, you must file Form 5500-EZ, “Annual Return of a One-Participant Retirement Plan” by July 31 of the following year. Failure to file this return triggers a brutal $250 per day IRS penalty, capped at $150,000.

Simplified Employee Pension (SEP IRA) Setup Protocol

A SEP IRA offers a friction-free establishment process with minimal reporting overhead:

1.

Adopt a Formal Agreement: Complete and sign Form 5305-SEP, “Simplified Employee Pension-Individual Retirement Accounts Contribution Agreement” or adopt a prototype SEP agreement provided by a financial institution. You do not file this form with the IRS; you simply retain the signed original in your permanent business files.

2.

Provide Employee Notifications: If you have eligible employees (who are at least 21 years old, worked for you in at least 3 of the preceding 5 years, and earned at least $800 in 2026), you must deliver a signed copy of Form 5305-SEP and its instructions to them.

3.

Establish Participant Accounts: Open a traditional SEP IRA (or a Roth SEP IRA under SECURE 2.0) for every eligible employee (including yourself) at a qualified financial institution to receive employer contributions.

4.

Fund by the Tax Deadline: You have until your business tax return filing deadline, including extensions, to establish the plan and fund employer contributions.

SIMPLE IRA Setup Protocol

Establishing a Savings Incentive Match Plan for Employees (SIMPLE IRA) is bound by strict calendar deadlines:

1.

Adopt a Written Agreement: Complete and sign Form 5304-SIMPLE, “SIMPLE Individual Retirement Account Contribution Agreement” (if you allow employees to select their own financial institution) or Form 5305-SIMPLE (if you designate a single custodian). Keep this document in your files.

2.

Establish the Plan by October 1: For any given tax year, the SIMPLE IRA plan must be formally established and active by October 1 of that year.

3.

Conduct the Annual Election Period: Provide a 60-day annual election period (typically November 2 through December 31) during which employees can elect to make salary reductions for the upcoming tax year.

4.

Deposit Employee Deferrals Promptly: Employee salary reduction contributions must be deposited into their SIMPLE IRAs within 30 days after the end of the month in which the salary was withheld. Employer matching contributions must be funded by the business tax filing deadline, including extensions.

Keogh Plan Setup Protocol

A Keogh plan (HR-10 plan) demands high administrative overhead and pension advisory support:

1.

Adopt a Custom Written Plan: Unlike IRA-based plans, a Keogh plan requires a highly complex, custom qualified plan document. You must hire a qualified third-party administrator (TPA) or pension actuarial firm to draft the plan documents.

2.

Obtain an IRS Determination Letter: For custom-drafted plans, you should submit the plan document to the IRS to secure a favorable determination letter verifying the plan’s qualified status.

3.

Execute by December 31: To claim tax deductions for tax year X, the Keogh plan document must be formally executed and signed by December 31 of year X.

4.

Ongoing Actuarial and Filing Overhead: For defined-benefit Keoghs, you must hire a credentialed actuary annually to compute mandatory funding levels, sign Schedule SB, and file Form 5500 annually, regardless of the plan’s asset balance.