5 Common Solo 401k Establishment Questions

QUESTION 1. 

Do I have to transfer all of my existing IRAs and 401k plans as soon as I open the solo 401k plan? Or can I still transfer money later?

ANSWER:

When funding a solo 401k plan using IRAs for former employer plan funds, you are not required to transfer all of your IRAs and former employer plan funds to a solo 401k; therefore, you can process partial transfers. 

QUESTION 2. 

Will a trust be create and all IRA and former employer plan money will be transferred to this trust?

ANSWER:

 A 401k is a trust & the solo 401k plan provider will draft  the solo 401k establishment documents as part of their services. As part of the establishment process, an account will be set up for the solo 401k at the institution of your choice (e.g. Fidelity or your local bank). This is the account where your rollover funds will be deposited.

QUESTION 3. 

Is there any relationship between new trust and my existing business?

ANSWER:

 In order to have a 401k, there must be an employer as 401k plans are for employees. As such, in order to set up a Solo 401k you must be self-employed. Therefore, if your self-employed business is an S corp, a partnership, LLC or sole proprietor, this business will be the sponsor of the Solo 401k.

QUESTION 4. 

 Can we transfer my and my wife's IRA, 401k  funds to this trust?

ANSWER:

 As long as both you and your wife are working in the business (e.g. receiving w-2 wages from the S-corp) then you can both participate in the Solo 401k plan and rollover funds from eligible pre-existing retirement accounts which would include non-Roth IRA accounts and former employer 401k plans.

QUESTION 5. 

 If we borrow money from the the fund, is $50,000 limit for myself, will my wife borrow another $50,000? 

ANSWER:

If you each participate in the Solo 401k plan you can each rollover funds to your own separate sub-account under the Solo 401k plan. You would then each be eligible to take a loan of up to 50% of the balance of your respective account not to exceed $50,000. The solo 401k plan provider will prepare required solo 401k loan documents as part of their services for no additional charge.

To learn more about the solo 401k rules, visit .