A solo 401k is just another name for an individual 401k. These special 401k plans were created by EGTRA in 2001 to benefit the small business owners who may only have a single participant for the plan – the entrepreneur themselves.
A solo 401k or individual 401k is for a self-employed business owner plus his/her spouse. If you have any other full time employees on your payroll, you do not qualify for a solo 401k plan.
The contributions to the plan are immediately 100% vested. The contribution limits for 2009 are $16,500 with an additional catch-up contribtuion of $5,500 if you are over the age of 50. Loans are allowed.
If you are a sole proprietor and are trying to determine which retirement plan works best for you – ask your financial planner about an individual 401k.