Retirement Plan - Sole Proprietor with one Employee

[duanecpa]

Situation - sole proprietor has an employee - sole proprietor would like a pension plan for the 1 employee and the sole proprietor is not interested in participating in the pension plan - other than an IRA, is there a retirement plan that the sole proprietor can put in place for the 1 employee?

Thank you.

[ATSMAN]

Generally it is the other way around. The sole prop want to contribute for itself and exclude the employee. However in your case the sole prop wants to exclude himself and contribute for the employee. If that is indeed correct then a 401(k) may work. The employee defers a portion of salary and the employer matches that. The sole prop does not defer any money, or minimal. If the contribution of the employee is higher than the sole prop, it should pass the discrimination testing.

[Roberts]

pension plan is a defined benefit plan.
401-k or Simple IRA is a defined contribution plan.

major difference and not interchangeable.

[Burke]

Situation - sole proprietor has an employee - sole proprietor would like a pension plan for the 1 employee and the sole proprietor is not interested in participating in the pension plan - other than an IRA, is there a retirement plan that the sole proprietor can put in place for the 1 employee?
Thank you.

I have an small employer (100% owner-shareholder Sub-S) who contributes each month to a SEPP for each of his employees. He does not make any contributions for himself. They do not contribute to the SEP themselves.

[John of PA]

I would seriously doubt if a plan where the owner discriminates against themself would draw attention from IRS. I can understand in some cases the owner wants to take care of the employee and the owner is not worried about himself becasue he is already well taken care of. I really don't think there is any problem here. The discremination rules are intended to protect rank and file employees.