The year 2001 ushered in many tax law changes. Some are set to end, but there’s one staying around that small business owners should know about.

It’s called the Super-Simplified 401(k) Plan, often called the Solo 401(k). I call this retirement plan the best kept secret in the tax code.

As a financial planner for more than 18 years, I’ve worked with many types of small businesses that would all qualify for this self-managed retirement plan: Real estate agents and appraisers, accountants and attorneys, consultants of all types, organic grocers and independent clothiers, just to name some examples. To be eligible, the key is that these independent entrepreneurs do not have full-time employees. They employ only themselves, partners, and/or family members.

Since traditional 401(k) plans are expensive to start up, costs are generally prohibitive for small businesses. The advantage to the Solo plan is that they are cost effective and have the largest deferral amount of all plans.

Plan participants can contribute a total of $51,000, or $56,500 for those age 50 and up. That comes from a combination of contributing pre-tax earnings, and a profit-sharing contribution of 20-25 percent of net earned income from the company.

Here are just a few questions that small-business owners may have:

Q: How can I get one started?

They can ask for help by going to a licensed and experienced financial adviser. Various providers can can point them in the direction of “do-it-yourself” firms like Vanguard or Fidelity, or even some insurance-based firms. Unfortunately, not many accountants are familiar with the Solo 401(k) plan.

Q: What are the requirements?

You have to own a business, whether you run it out of your home, or reside in an office. The qualifications are very generous: Businesses can be set up as a sole proprietorship, as a limited liability partnership or limited liability company, or as a C corporation or an S corporation.

Q: Can I borrow or take loans?

YES! This is the only other plan available that allows for loans other then the traditional 401k. This particular facet is one my small business clients get excited about, because if you need a capital infusion to buy more product, equipment or supplies, or even an office, tax-free loans are available with no penalties. The interest on the loan is paid back to the borrower, given they are the “bank.” In some cases you can choose the interest rate.

Q: What investments can be made?

Unlimited! Solo plans can be self-directed, meaning you can invest in stocks, bonds, mutual funds, gold, annuities, CDs or anything the SEC allows.

Q: Can I combine other retirement accounts into this plan?

Yes. All types of retirement accounts can be rolled over, including IRAs and pension plans. This makes tracking your accounts easier – and, you’ll have the advantage of that loan provision.

Q: I’m a new business. Can I afford to start a Solo 401(k)?

Yes. They are cost effective; some have no start-up costs and a $15 yearly fee. Contributions of as low as $50 can be made from the start. There are no administration costs, as is the case with traditional 401(k) plans, until you reach $250,000 in total plan assets.

The Solo 401(k) is an amazing plan that not many investors know about. With the high level of contributions allowed, the low costs, and even a loan provision, this can be a great safety net for a small businesses. It’s also a great way to save money on taxes now, and plan for your future.