A Solo 401(k) is a retirement plan for business owners, partners, and their spouses. This article covers how Solo 401(k) plans work at Gusto, who can open one, contribution limits, and what to expect as your business grows. Expand the sections below to learn more.
A Solo 401(k) works the same way as any other 401(k) plan. The key difference is who participates — only owners, partners, and their spouses are eligible. It can be a good option for self-employed individuals and similar business types.
To participate, owners, partners, or spouses need to perform actual work for the company and get compensation for that work. Self-employment income counts.
Any business can open a Solo 401(k) plan, as long as only owners, partners, or spouses will be eligible to participate.
A business sponsoring a Solo 401(k) can have common-law employees, but those employees cannot be eligible for the plan under the plan document's eligibility requirements.
Important: If you are part of a controlled or affiliated service group, you cannot open a Solo 401(k) plan at Gusto. Legally related groups need to be on a Starter or Premium plan.
Having common-law employees does not automatically prevent you from having a Solo 401(k). It means those employees need to be excluded from participating in the plan.
At Gusto, employees can only be excluded if they meet one of the following:
Under the age of 21.
Have worked for the company for less than one year (no hours required).
Are one of four excluded employee classes: non-resident alien, resident of Puerto Rico, union employee, or leased employee.
Pro tip: If you might hire employees outside the excluded categories, consider setting a 12-month service requirement now. It gives you time to make plan changes before new employees become eligible.
With a Solo 401(k), you can make contributions as both an employee and an employer. The total combined amount you can contribute is $72,000 for 2026.
The employee contribution limit for Solo 401(k) plans is the same as standard 401(k) limits: $24,500 for 2026. Catch-up contributions are also available based on your age.
As an employer, you can make a profit-sharing contribution of up to 25% of eligible compensation. If you get self-employment income, calculating your limit is more complex than a straightforward 25% of earned income.
Profit-sharing contributions need to be made by the tax-filing deadline plus any applicable extension. The compensation limit used to calculate your profit-sharing contribution is $360,000 for 2026.
Note: A Solo 401(k) can include matching contributions, and they count toward the same limits. However, matching contributions are uncommon in Solo 401(k) plans.
Gusto supports both pre-tax and Roth 401(k) employee contributions for all 401(k) plan offerings, including Solo 401(k) plans.
When you sign in to your Gusto Retirement account, you can go to the 401(k) participant dashboard or the plan administrator dashboard. You can toggle between the two once signed in.
Participants who get W-2 income can set up 401(k) contributions from the Contributions page in the main menu. Participants who get self-employment income can set up a one-time or recurring owner's draw.
If you are a designated plan administrator, we will publish a profit-sharing task in the first quarter after we get your compensation data (if applicable). To start profit sharing, complete the task.
All 401(k) plans need to pass IRS-required nondiscrimination testing each year. Because Solo 401(k) plans only cover owners, partners, or spouses — all of whom are considered highly compensated employees (HCEs) — they automatically pass this testing, as long as any rank-and-file employees are properly excluded from the plan.
You typically do not have to file a Form 5500 if plan assets are less than $250,000. If your plan's total assets at the end of the plan year go above that limit, you need to file a Form 5500-EZ (or a Form 5500-SF with the one-participant plan checked).
We include preparation and electronic filing of Form 5500s at no added cost. If you moved your plan to Gusto Retirement from another provider, you need to provide a participant valuation report so we can file the Form 5500, if required.
If you have a Solo 401(k) and employees other than co-owners, business partners, or spouses meet the plan's eligibility requirements, you can continue your 401(k) plan with Gusto. However, your plan would need to transition to one of our standard 401(k) pricing tiers. Any Solo 401(k) discounts would no longer apply.