Solo 401k Closing Questions

QUESTION: 

I do not think I am going to continue to operate a business through . I do however, still have some money loaned out through contracts that will not be paid back for several years.Can you advise of what I should do or steps to take?

ANSWER: 

Here are your ONLY options pursuant to the IRS regulations with respect to closing the solo 401k plan:

Option A. Transfer the solo 401k assets in-kind (that is, instead of selling the notes, they can be transferred) to a self-directed IRA, this would not subject the solo 401k plan to taxes because the rules allow for the transfer of 401k assets to an IRA.

Option B. Distribute the promissory notes in you name (that is, the notes are assigned to your name) from the solo 401k which will result in paying federal and state taxes as well as a 10% early distribution penalty if you are under age 59 1/2.

Option C. Continue with the solo 401k and leave the assets intact.

Both options A and B entail issuing a 1099r and a final Form 5500-ez to the IRS to formally close the plan.

To learn more about the solo 401k rules, .