IRS Approved Solo 401k Provider Types

The IRS approves solo 401k plans offered by solo 401k providers. The various solo 401k plan providers all have to obtain a letter from the IRS approving their plan. The items that distinguishes IRS approved solo 401k provider types include the following.

Item 1: Investing in Alternative Investments

Not all solo 401k providers offer a plan document that allows for investing in alternative investments such as real estate, precious metals, promissory notes, tax liens, private companies, futures, options, commodities and annuities.

Item 2: After-Tax Contribution for Conversion to Mega Roth Solo 401k

Not all solo 401k providers offer a plan that allows for solo 401k after-tax contributions which can then be converted to a Roth Solo 401k (this is known as the mega Roth solo 401k conversion). 

Item 3: Roth Solo 401k Contributions

Not all solo 401k providers allow for Roth Solo 401k contributions.

Item 4: Solo 401k participant Loans (borrowing from your own solo 401k)

Not all solo 401k plan providers allow for solo 401k participant loans, also referred to as borrowing or taking a loan from your own solo 401k .

 Item 5: Checkbook Control Solo 401k

Not all solo 401k plan document providers allow the solo 401k owner/trustee to place investments by writing a check, which results in the solo 401k owner serving as the trustee of his or her own alternative investment documents, thus foregoing the need for a custodian provider to hold the alternative investment documents and assets (e.g., deeds, tax lien certificates, private stock certificates, gold and silver precious metal coins, etc.).

Item 6: Same Property Rollover Rule 

Not all solo 401k providers are aware that unlike IRAs, the same property rollover rule does not apply to solo 401k plans, and thus won't allow for it. For example, if a distribution of property (e.g., a rental property) is processed from a solo 401k plan, the solo 401k participant has the choice of rolling over the rental property to a self-directed IRA or the solo 401k participant can sell the rental property distributed form the solo 401k and rollover the cash proceeds from the sale.  This applies regardless if the proceeds from the sale are greater or less than the value of rental property when it was distributed from the solo 401k plan. 

Item 7: Solo 401k Compliance Support

Not all solo 401k providers provide compliance support regarding the rules for investing in alternative investments such as real estate and precious metals, the rules surrounding solo 401k plan contributions types (e.g., the difference between Roth Solo 401k contributions and after-tax solo 401k contributions), and the solo 401k distribution and reporting rules, to name a few.

Examples of solo 401k provider types that provide solo 401k plans that allow for all or some of the above "items".  

Company Name: Fidelity Investments: Of the above listed items, they only provide item 3.

Company Name: Voya Financial: Of the above listed items, they only provide items 3 and 4.

Company Name: My Solo 401k Financial (DBA MYSOLO401K): The solo 401k plan that they offer allows for ALL items listed above. 

CLOSING COMMENTS: Lastly, when establishing/opening a solo 401k plan with any of the above solo 401k plan providers, or any other provider for that matter, you can confirm that their plan has been approved by the IRS by clicking on the following links:

1. IRS Excel List of 401k Plan Document Providers

2. Determining Pre-approved 401k plans