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Beth A. Botti, CFP®, ChFC, CLU, CDFA™
Financial Consultant
California Insurance License #0G24537
612 Wheelers Farms Road, Milford, CT 06460
Phone: 203-877-6556 Ext. 169
Fax: 203-301-0736
Email: beth.botti@equitable.com
November/December 2017
Let's talk business Q&A
Q. My spouse and I run our own business. We do not have any retirement savings. Would setting up a solo 401(k) plan make sense?
A. A solo — or one-participant — 401(k) plan may be a suitable choice for anyone who is self-employed or owns a small business with no employees (other than a spouse) and wants to establish a retirement plan offering potential tax advantages. A solo 401(k) plan allows you to defer up to $18,000* of compensation (or “earned income” if you are self-employed), plus an additional $6,000* if you are age 50 or older. On top of that, your business can make a tax-deductible profit sharing contribution to the plan of up to 25% of your annual compensation (25% of “earned income” if you are self-employed). Total annual
contributions to an individual 401(k) plan account, not counting catch-up contributions, cannot exceed $54,000 (Internal Revenue Code Section 415(c)(1)(A); Notice 2016-62, 10/27/2016).*
Q. I’m thinking of having my company take out a key person life insurance policy on our top software designer. Besides getting her consent, is there anything else we should do?
A. When a successful small business relies heavily on a key individual, the death of that person could be devastating. Key person life insurance is one way to help mitigate the financial fallout. The business pays the policy premiums and is also the beneficiary of the policy. The life insurance payout helps ensure that the business would be able to operate until a replacement for the key person is found. The proceeds of the policy can be used to cover essential business expenses, such as salaries, overhead and loan payments while the business recovers from the loss of the key person. To preserve tax-free treatment of the policy proceeds, you need to take certain steps. In addition to following specific notice and consent procedures, you will need to meet certain other requirements, including filing IRS Form 8925, Report of Employer-Owned Life Insurance Contracts, with your company’s annual income tax return (Internal Revenue Code Section 6039 I; Treasury Regulation Section 1.6039I-1).
* These 2017 dollar limits may be inflation-adjusted for future years.
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Duly registered and licensed financial professionals offer securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA,SIPC (Equitable Financial Advisors in MI & TN), offer investment advisory products and services through Equitable Advisors, LLC, an SEC-registered investment advisor, and offer annuity and insurance products through Equitable Network, LLC (Equitable Network Insurance Agency of Utah, LLC in UT; Equitable Network of Puerto Rico, Inc.). Equal Opportunity Employer - M/F/D/V. Equitable Advisors and its associates and affiliates do not provide tax, accounting, or legal advice or services. Representatives may transact business, which includes offering products and services and/or responding to inquiries, only in state(s) in which they are properly registered and/or licensed. Your connection to this website does not necessarily indicate that the sender is able to transact business in your state. The information in this website is not investment or securities advice and does not constitute an offer. For more information about Equitable Advisors, LLC you may visit https://equitable.com/crs to review the firm's Relationship Summary for Retail Investors and General Conflicts of Interest Disclosure.
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