Cookie-Cutter Solo 401k plan from discount broker?

[Ed Brownstein]

It appears that some of the brokers have cookie-cutter Solo 401k plan agreements for their customers.  Reading through the agreements the plans allow for Real Estate & loans.  I know mysolo401k.com allows their plans to be housed at Fidelity, Schwab. & TD Ameritrade.

Could it be as simple as setting up a plan and making withdrawals for RE activity?

Sample plan agreement:   https://www.dropbox.com/s/s3bl19e7847g9zy/QRP%20Pl...

[Ed Brownstein]

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[Frank M.]

from Schwab-Solo-401k

Charles Schwab is simply providing brokerage account for your Solo 401k, and MySolo401k.net is your Solo 401k provider. In other words, even though Schwab also offers Solo 401k, their Solo 401k plan document restrict you to only investing in stocks and mutual funds; however, by using our Solo 401k document, which allows you to serve as trustee of the Solo 401k and invest in alternative investments such as real estate, precious metals, tax liens, promissory notes, private stock, etc., as well as process Solo 401k Loan, Schwab is not involved in the administration of the Solo 401k.

In other words, Schwab's role is to provide the brokerage side to the account. But the dropbox link you offered shows that TD supports the Real Estate in the self directed account. (Page 58) 

It seems to me, if you want the account to hold stock (at Schwab) as well as RE, the plan is good. Otherwise just using TD will get you what you need. Unless I'm missing something?

[Bill Gulley]

If a street broker is handing this out I'd be very leery regardless of who did the backroom operations. I don't give tax advice beyond simple, but assets must be valued annually, that can mean for non-liquid assets a market appraisal of a note or real estate and expense in administration. I investigated this in the past and it wasn't a viable option for me with RE or notes at that time, nor have I heard of anything new. Ask an estate attorney, trust manager and CPA.  

[Ed Brownstein]

Originally posted by @Frank M.:

from Schwab-Solo-401k

Charles Schwab is simply providing brokerage account for your Solo 401k, and MySolo401k.net is your Solo 401k provider. In other words, even though Schwab also offers Solo 401k, their Solo 401k plan document restrict you to only investing in stocks and mutual funds; however, by using our Solo 401k document, which allows you to serve as trustee of the Solo 401k and invest in alternative investments such as real estate, precious metals, tax liens, promissory notes, private stock, etc., as well as process Solo 401k Loan, Schwab is not involved in the administration of the Solo 401k.

In other words, Schwab's role is to provide the brokerage side to the account. But the dropbox link you offered shows that TD supports the Real Estate in the self directed account. (Page 58) 

It seems to me, if you want the account to hold stock (at Schwab) as well as RE, the plan is good. Otherwise just using TD will get you what you need. Unless I'm missing something?

Frank -  "The Solo 401k document which allows me to serve as trustee"

That makes perfect sense to me and is exactly what I was looking for.  Thank you.

[Dmitriy Fomichenko]

@Ed Brownstein 

TD Ameritrade Individual 401(k) Profit Sharing Plan is NOT a self-directed plan. You cannot invest your plan assets in anything other than what is offered by TD Ameritrade.

This type’s of Plans are usually managed by the Custodian, and the investments options are limited in the Basic Plan Document:

“…limit the available investments for Participants’ individual direction to certain specified investment options (including, but not limited to, certain mutual funds, investment contracts, deposit account and group trusts” (see section 7.22 B)

While this plan can be trustee managed, the plan document again limits investments only in the Fund:

“The responsibilities of the Trustee shall be limited to the following duties: To receive Plan contributions and to hold, invest, and reinvest the portion of the Fund for which it serves as Trustee, as authorized by the Employer or its designee, without distinction between principal and interest, provided, however, that nothing in the Plan shall require the Trustee to maintain physical custody of stock certificates representing assets within the Fund” (see section 8.02 A.1)

You can find out more info about TD Ameritrade 401k plan here:

https://www.tdameritrade401kplan.com/

Here is a link to the Investment Fund Summary Table showing available investment options if you use TD Ameritrade to set up your Plan:

https://www.fascore.com/PDF/td_ameritrade/Investment_Fund_Summary_Table.pdf

Also, in addition to the Basic Plan Document you need to review Summary Plan Description as well as Adoption Agreement, which is where certain features of the plan will be added or removed. If you see some language in the plan document about real property it doesn’t mean that you can use your plan for real estate investments. This is not something that you will want to play around on your own – it’s your entire retirement account that is on the line here. Work with the expert.

If you wish to invest your retirement funds in real estate and other non-traditional investments, then you need truly self-directed plan without investment limitations other than those imposed by the IRS.

Hope this helps.

[Justin Windham]

I've been running into questions about the differences between brokerage plans and truly self-directed, self-trusteed 401k plans lately. While the latter plans with allow investment into alternative assets such as real estate in addition to being able to open accounts at the brokerage of your choice, brokerage plans typically restrict you to only traditional products (think stocks, bonds, mutual funds) offered by that particular brokerage.

[Mark Nolan]

@Ed Brownstein

Some of the major brokerage firms offer brokerage accounts for self-directed solo 401k plans that can be invested in real estate while still maintaining the option to invest in equities.