Written by Jacey Harmon
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Uni-Ks are retirement accounts for self employed individuals. Uni-Ks are intended to be used by businesses whose only employees are the owner or the owner's immediate family. Some businesses that employ individuals part time that are not immediate family members may be able to exclude them from the plan.

How Do Uni-Ks Work?

Uni-Ks are elective deferral programs where eligible employees "elect" to contribute funds into the account. Contributions are made from pre-tax earnings from both the business profits and your salary. In some instances individuals can contribute up to 100 percent of their income. Earnings and dividends grow tax deferred until withdrawn at retirement age.

Uni-Ks became available after changes were made to regulations of 401K plans in 2001. The changes in the law allow for higher contributions and lighter regulations for Uni-Ks. One can take advantage of annual contribution limits--up to $41,000 in some instances. Being able to save such a large amount every year for retirement is a huge bonus for this type of plan.

Uni-Ks have lower administration costs than traditional 401Ks because they are not subject to strict discrimination tests. Traditional 401K plans are subject to periodic audits to determine if each employee is getting their appropriate contribution. These audits, or discrimination tests, are the main reason why traditional 401K plans are too expensive for small businesses.

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