What Types of Retirement Funds can I Roll into a Solo 401K Plan?

August 25th, 2011

When it comes to determining whether to adopt a Solo 401K Plan, one of the first questions that needs to be asked is whether the individual or small business is eligible to adopt the Plan.  The second question that generally arises is whether ones existing retirement funds are available for rollover into the Solo 401K Plan.

One of the most popular reasons for adopting a Solo 401K Plan, other than the high contribution limits and the tax-free loan, is the checkbook control feature.  As a result, many people looking to adopt a Solo 401K Plan want t make sure that they can roll their current retirement funds into the new Solo 401(k) Plan.

Solo 401K Rollover

When determining whether certain retirement funds may be transferred into a Solo 401(k) Plan, there is generally one rule.  If the funds are retirement funds and are a pre-tax then they will likely be available for rollover.  Note – one must look at the 401(k) Plan documents or speak with the plan administrator to make sure that the plan allows for rollover, although, most plans do.  In other words, as long as the retirement funds being rolled in are not after tax (Roth IRA) the funds can be transferred to the new Solo 401K Plan.  In the case of a Roth 401K, even though the IRS permits one to roll in Roth 401(k) Plan funds to a Solo 401(k) Plan with a Roth component, a significant number of Solo 401K plan documents do not allow for it due to the perceive administrative burden.

In general, a plan participant can roll IRA, SEP-IRA, 401(k), 403(b), 457(b), pension plan, etc retirement funds tax-free to the new Solo 401K Plan.  In other words, almost any type of pre-tax retirement funds. The funds would be directly rolled-over tax-free to the Solo 401(k) Plan bank account, which can be opened at any local bank. Once the funds have been rolled over to the new plan, the trustee of the Plan will have checkbook control over the funds. With a Solo 401K Plan, also called an Individual 401K or Self Directed 401K Plan, making an investment is as easy as writing a check. With a Solo 401k Plan with “checkbook control” you no longer have to pay excessive custodian fees based on account value and transaction fees. By using a Solo 401k Plan with “checkbook control” you can take advantage of all the benefits of self-directing your retirement assets without incurring excessive custodian fees and custodian created delays.

 

To learn more about the Solo 401K Plan, please contact a 401K Expert at 800-472-0646 or visit www.solo401kexperts.com