Editing 401(k) (section)

==Plans for certain small businesses or sole proprietorships==
{{Main|Solo 401(k)}}
The [[Economic Growth and Tax Relief Reconciliation Act of 2001]] (EGTRRA) made 401(k) plans more beneficial to the self-employed. The two key changes enacted related to the allowable "Employer" deductible contribution, and the "Individual" IRC-415 contribution limit.

Prior to EGTRRA, the maximum tax-deductible contribution to a 401(k) plan was 15% of eligible pay (reduced by the amount of salary deferrals). Without EGTRRA, an incorporated business person taking $100,000 in salary would have been limited in Y2004 to a maximum contribution of $15,000. EGTRRA raised the deductible limit to 25% of eligible pay without reduction for salary deferrals. Therefore, that same businessperson in Y2008 can make an "elective deferral" of $15,500 plus a profit sharing contribution of $25,000 (i.e. 25%), and—if this person is over age 50—make a catch-up contribution of $5,000 for a total of $45,500. For those eligible to make "catch-up" contribution, and with salary of $122,000 or higher, the maximum possible total contribution in 2008 would be $51,000. To take advantage of these higher contributions, many vendors now offer [[Solo 401(k)|Solo 401(k) plans or Individual(k) plans]], which can be administered as a Self-Directed 401(k), permitting investment in real estate, mortgage notes, tax liens, private companies, and virtually any other investment.

Note: an unincorporated business person is subject to slightly different calculation. The government mandates calculation of profit sharing contribution as 25% of ''net self-employment (Schedule C) income''. Thus on $100,000 of self-employment income, the contribution would be 20% of the gross self-employment income, 25% of the net after the contribution of $20,000.

===Rollovers as business start-ups (ROBS)===
ROBS is an arrangement in which prospective business owners use their 401(k) retirement funds to pay for new business start-up costs.<ref name="irs.gov">{{cite web|url=https://www.irs.gov/retirement-plans/rollovers-as-business-start-ups-compliance-project|title=Retirement News for Employers – Fall 2010 Edition – Rollovers as Business Start-Ups Compliance Project|publisher=IRS}}</ref> ROBS is an acronym from the United States [[Internal Revenue Service]] for the IRS ROBS [[Rollovers as Business Start-Ups]] Compliance Project.

ROBS plans, while not considered an abusive tax avoidance transaction, are questionable because they may solely benefit one individual – the individual who rolls over his or her existing retirement 401(k) withdrawal funds to the ROBS plan in a tax-free transaction. The ROBS plan then uses the rollover assets to purchase the stock of the new business. A [[C corporation]] must be set up in order to roll the 401(k) withdrawal.