Solo401K - How to administer a loan to myself

[Jeff Caravalho]

Hi BP,  I would like to loan myself 50K from my solo401K to pick up a foreclosure at auction.  My custodian says it's my responsibility to administer it.  Seeking direction on the best way to do that.  I'd like to minimize my payments on this, so 50K over 5 yrs.  Do I need to set up an excel spreadsheet?  What exactly does he mean by administer?  I know I need to fill out my own loan application & promissory note, where do I send those docs, to the custodian?  what else do I need to do to satisfy the requirements here, especially for the IRS.  Thanks!

[Brian Eastman]

@Jeff 

@Jeff Caravalho

If that is the best you got from your custodian, then you picked the wrong folks to setup your Solo 401k with.  Perhaps save the BP community from such by letting them know who this non-helpful provider is.

Yes, you do self-administer the loan.

The plan documents should contain a Participant Loan Policy and Promissory Note that will guide you.

Most plans require that the loan be amortized over 60 months, but allow for payments on a monthly or quarterly basis.

You need to keep records of the loan payments and outstanding balance.  A simple spreadsheet will do.  It should, of course, correspond to payments deposited into the Solo 401k bank account.

It is pretty simple.  Just keep good records.