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Dmitriy Fomichenko

About Dmitriy Fomichenko

Dmitriy is the founder and president of Sense Financial Services LLC, boutique financial firm specializing in self-directed retirement accounts with checkbook control. He began his career in financial planning and real estate investing in 2000. He owns multiple investment properties in various states and is a licensed California Real Estate Broker. Over the years, he has instructed hundreds of investment and financial planning seminars and has mentored thousands of investors.

Posts by Dmitriy Fomichenko:

Hands off my IRA

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Many Americans keep their wealth, or a large portion of it, in their retirement account. It’s a great way to build your retirement “nest egg” in a tax-deferred vehicle, and if you make wise investment choice, allow your investment returns compound, keeping the money moving, you can reach retirement with millions. It’s been my honor to help our clients unlock their retirement accounts and give them the ability to invest in alternative assets.

There is a proposed law that could have a massive, adverse impact on self-directed IRAs and 401ks. This legislation would seek to prohibit investments made from IRAs and other retirement vehicles into private placements, drastically reducing investors’ ability to diversify into other asset classes outside of the stock market. As the bill is currently worded, it would force investors to liquidate these types of private holdings inside retirement accounts within the next 2 years, triggering a taxable event, or face their full retirement account being stripped of its tax- deferred status. 

Even if it does not directly affect you, please GET INVOLVED! Tax attorney, John Hyre, has dug into the bill and shared his thoughts here. He provides a very good breakdown of the bill and ways to take action.

https://www.handsoffmyira.com/

Penalties for late filing of Form 5500-EZ

Under the SECURE Act, penalties have increased substantially. Effective for returns that are required to be filed after December 31, 2019, the SECURE Act increased the penalty to $250 per day, not to exceed $150,000 for a late-filed form.

But the penalties don’t stop there. In addition to the IRS penalty, the DOL can assess a civil penalty against a plan sponsor in an amount not to exceed $1,100 per day as a result of failure to timely file Form 5500.

Plan administrators may also face other penalties on incomplete filings unless they submit a statement of reasonable cause for failing to file a complete annual report and the DOL approves it.

This makes proof of mailing extremely important, even if it is mailed well before the deadline.  Be sure to send using certified mail (such as Priority Mail), make sure it’s scanned in at the post office and save a copy of the label/receipt and the tracking history in your files.  Tracking history is usually online for a limited time (several weeks), so it’s best to print it out upon delivery.

As always, if you need any assistance please don’t hesitate to contact our office.

SECURE Act: New part-time eligibility rules for 401(k) plans

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In 2020 and prior years, Solo 401k plans could exclude part time W-2 employees who worked less than 1,000 hours from participating in a 401k plan. This all changes for both full-time employer 401k plans and owner-only Solo 401k plans starting on January 1, 2021.

The SECURE Act
Stemming from the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), Solo 401k plans will be impacted by the three years, part-time (500 but less than 999 hours) employee rule that will allow part-time employees to choose to make employee elective contributions to the company-sponsored 401k plan.

2020 and Prior
Before the passage of the SECURE Act, non-owner W-2 employees (common law employees) who worked less than 1,000 hours during the plan year could be excluded from having the option to participate in a 401k plan and thus did not impact the owner-only businesses from setting up a Solo 401k plan. Only those years after 2021 are counted.

2021 and Future Years
The three year provision is effective for the 2021 plan year, but years before 2021 do not count for purposes of counting the three-year eligibility.

Long-Term, Part-Time Employee
A W-2 employee will be deemed a long-term, part-time employee once he or she completes 500 hours of service/work in three consecutive 12-month periods.

Does the SECURE Act nullify the 1,000 hours of service per year rule?
No. 401k plans must now have dual eligibility requirements. An employee can become eligible for the plan by fulfilling either: (a) the one year of service requirement (1,000 hours of service in one year), or (b) the three years of service requirement (at least 500 hours of service for three consecutive years).

Excess Solo 401k contributions

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The Solo 401k participant typically makes annual Solo 401k plan contribution when completing business tax return for the year. As a result, the Solo 401k participant can usually determine her IRC Sec. 404 deduction limits before making her Solo 401k contribution, thus preventing any excess Solo 401k contribution headaches.

10 Percent Penalty and Form 5330: When the Solo 401k participant contributes more than the allowable deduction for a given tax year, he is typically required to pay a 10 percent penalty on the over contribution amount also known as the excess nondeductible contribution amount pursuant to (IRC Sec. 4972). As such, this penalty amount must be reported to the IRS by the plan participant since he is the owner of the business by filing IRS Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, and remit the penalty to the IRS. Please refer to IRC Sec. 404(a)(1)(E) as it details that the amount of the otherwise deductible contribution that exceeds the limitation for any given year shall be carried forward indefinitely and applied to subsequent years.

IMPORTANT: Even though excess nondeductible Solo 401k contributions may be returned to the Solo 401k employer under limited circumstances, the Solo 401k employer runs the risk of incurring substantially greater penalties by taking a reversion of plan contributions. The reversion penalty is typically as high as 50 percent depending on the circumstances pursuant to (IRC Sec. 4980).

First Determine Contribution Type

When removing excess contributions from a solo 401k plan, you first need to determine the type of contribution being removed. There are 2 (two) types of contributions that apply to a solo 401k plan.

  • Type 1 (one): Employee Elective Deferrals Contributions that exceed the annual limit
  • Type 2 (two): Employer Profit Sharing Contributions

The Rules Are Different for Each Contribution Type

The rules for removing the employee contributions vs the employer profit sharing contributions are different and are discussed below.

Here is what the IRS code says regarding removing Employee Contributions

If the excess salary deferral is not returned on or before April 15 of the following year, the contributing participant must pay income tax on the deferral both in the year of deferral and in the year of distribution. The deferrals are not included as after-tax assets even though they have previously been included in income in the year of deferral (IRC Sec. 402(g)(1) and (Treas. Reg. 1.402(g)-1(e)(8)). The earnings on the excess will be taxed in the year of distribution. Any corrective distribution of less than the entire amount of the excess deferral plus income is treated as a pro rata distribution of excess deferrals and income (IRC Sec. 402(g)(2)(D), Treas. Reg.1.402(g)-1(e)(10)).

For the employer contributions (profit sharing), here is what the rules state:

  • They will need to remain in the solo 40k plan and treated as contributions in future years. However, a 10% penalty will need to be paid on the over contribution amount also known as the excess nondeductible contribution amount pursuant to  (IRC Sec. 4972).
  • This penalty amount of 10%  will need to be reported by the solo 401k owner by filing IRS Form 5330, Return of Excess Taxes Related to Employee Benefit Plans, and remit the penalty to the IRS.
  • Please refer to IRC Sec. 404(a)(1)(E) as it details that the amount of the otherwise deductible contribution that exceeds the limitation for any given year shall be carried forward indefinitely and applied to subsequent years.

Plan number

What is my plan number?

Answer:

If you had us set up a brand new plan for you, the plan number will always be 001. If you had us amend and restate your existing plan, it may be a number other than 001. Please refer to page 1 of  your plan Adoption Agreement to verify your three digit plan number.

Crypto In Your Solo 401k

Can your retirement account own crypto?

Yes! Cryptocurrency and other crypto assets are allowed inside of the retirement accounts just like gold, real estate, stocks, bonds and ETFs.

IRS Thoughts on Cryptocurrencies

The IRS released notice 2014-21 on March 25, 2014 where they state they don’t exactly treat cryptocurrencies like currency, but rather more like property (real estate). This sparked a long debate between the Securities and Exchange Commission (SEC) and the Commodities & Futures Trading Commission (CFTC) on whose domain crypto assets fall.

In notice 2014-21, the IRS states, “virtual currency is treated as property for U.S. federal tax purposes” which also means any profits made on selling those currencies result in “general tax principles that apply to property transactions apply to transactions using virtual currency”.

To put it plainly, the IRS will charge capital gains taxes on any profits made by selling crypto assets, either short-term capital gains (treated as ordinary income) or long-term capital gains (generally 15-20% if the asset is held longer than twelve months).

IRS Perspective: Crypto assets in your 401k

The IRS doesn’t tell you what you (or your retirement account) can invest in; the IRS prefers to tell you what is prohibited.

Both section 408 and section 4975 of the Internal Revenue Code (IRC) detail what types of investments and what type of persons are prohibited from transacting with the retirement account.

Prohibited Transaction rules are designed so that neither the participant nor the retirement account can benefit from the other’s involvement. In other words, you can’t have a sweetheart deal for yourself or the retirement account. The Department of Labor and IRS have decided the easiest way to keep that from happening is to prohibit certain “disqualified persons” from transacting with the retirement account.

A disqualified person is defined in IRC Section 4975(e)2 and generally includes:

  • The 401k plan participant (you)
  • Your spouse
  • Your parents and grandparents
  • Your children and grandchildren
  • Business or entity you (or your spouse) own or have a controlling interest
  • Business or entity your parents own or have a controlling interest
  • Business or entity your children own or have a controlling interest

Since the IRS considers crypto assets to be a capital asset, similar to real estate or stocks/bonds, the retirement account is allowed to buy, sell and hold crypto!

Steps to Using the Solo 401k to invest in Crypto

Crypto assets are purchased from a cryptocurrency exchange. These exchanges are highly regulated as they are the “onramp” from fiat currency (e.g. dollars, pounds, yen, etc) to crypto assets.

You can open a crypto exchange account in the name of your Solo 401k trust or through a Special Purpose LLC.

The crypto exchanges Gemini and Kraken will allow you to open a crypto exchange account in the name of your 401k trust.

For all other exchanges, you’ll open an account in the name of the Special Purpose LLC connected to your Solo 401k. This structure is often called a 401k LLC, similar to the IRA LLC structure (Checkbook Control IRA).

Let’s go over the steps to getting crypto assets in your Solo 401k:

  1. Set up and fund the Solo 401k
  2. Open an exchange account to buy crypto assets
    • The crypto exchange account will be in the name of your 401k trust, or use the Special Purpose LLC. This should be a brand new exchange account. You cannot use a pre-existing crypto exchange account. No personal funds are allowed in this new crypto exchange account, only retirement assets.
  3.  Complete an Investment Authorization form for your records (located under "Miscellaneous Forms" as the "General Investment" form)

Helpful Hints on Buying & Storing Crypto in the Solo 401k

  • Use cold storage (offline hardware wallets): This reduces your exposure to hacking on cryptocurrency exchanges
  • Open a brand new exchange account in name of 401k trust (or special purpose LLC). Do not use an existing exchange account you opened in your name for retirement account holdings.
  • Only use retirement funds from your Solo 401k, or 401k LLC for your retirement funds exchange account
  • Never mix personal holdings with retirement holdings (online or offline)
  • As your own 401k plan administrator, keep good records of what you purchased and when
  • Never share your exchange login information, or your private keys with anyone
  • Always buy crypto from reputable exchanges (you are not allowed to buy or sell crypto to or from any disqualified persons)

Solo 401k and personal taxes

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Can you provide guidance on what I'm required to do on the tax/CPA side of things? What should I submit to my accountant?

Answer:

IMPORTANT: Please note that we are not qualified to provide tax, legal or investment advice.  This information is intended as general guidance only.  You should always consult with an experienced tax professional regarding your personal tax situation.

For the Solo 401k plan itself, you may or may not need to submit the 5500-EZ form.  Please review the annual filing requirements HERE.

As plan administrator of your Solo 401k, it is your responsibility to maintain the recordkeeping of the plan.  This includes the contributions, distributions, investments, etc.  All recordkeeping forms are located under the Maintenance tab within “Miscellaneous Forms.”

For your personal taxes, you will need to report contributions made to the plan:

  • Employee elective deferral contributions are reported on the first page of your personal tax return (Form 1040). Remember:  if your plan is sponsored by a corporation, you need to process contributions through the payroll.  All contributions will need to be reflected on the paycheck as well as on Form W2. See HERE for details.
  • Employer profit sharing contributions are reported on the corporate tax return.  If your plan is sponsored by a sole proprietorship or single-member LLC, this contribution needs to be reported on your Schedule C.

Other things that would affect your personal taxes are:

  • Roth conversion
  • Distribution
  • Defaulted loan*

* The Solo 401k loan is in default when the cure period has passed.  The loan is then considered as a distribution and is taxable and reportable as income.

All of the above are taxable events. If you perform any of the above, you will need to report it through Form 1099-R.  As the administrator of your Solo 401k, you are responsible for filing Form 1099R on behalf of your plan. If you would like assistance with generating a 1099-R, please contact us at the beginning of January of the following year to request this service.

CARES Act F.A.Q.

We understand that the uncertainty and disruption caused by COVID-19 have led to a lot of questions including many related to retirement plan administration. While the situation has been changing on an almost hourly basis, we wanted to distribute answers to the questions we are seeing often based on the information we have at this time.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the CARES Act) was signed into law. This expansive law included a number of provisions that affect retirement plans that are intended to give participants affected by the current pandemic access to their assets in retirement plans while minimizing the tax consequences and maximizing the ability to return the assets to the plan, if it is possible.

While much of the language regarding retirement plan provisions is similar to provisions used in the past for disaster relief and RMD waiver, it is unclear at this time how much we can rely on guidance issued related to those changes. This FAQ is intended to be a general overview of the provisions and it is expected that the IRS and/or DOL will issue guidance related to these provisions in the future.

For issues not addressed by the CARES Act, the current rules continue to apply unless there is further legislation or guidance.

Many of the topics discussed below are complex topics that we only address at a very high level; this FAQ is not intended to be a full discussion of all factors involved in making plan administration determinations.

Coronavirus-Related Distributions

Q1. What is a Coronavirus-Related Distribution (CVRD)?

A1. A CVRD is a distribution to a “CVRD Qualified Participant” that is taken on or after January 1, 2020 and before December 31, 2020.

Q2. Do plans have to allow for Coronavirus-Related Distribution (CVRD)?

A2. No, CVRDs are optional distribution triggers.

Q3. Who is a CVRD Qualified Participant?

A3. A CVRD Qualified Participant is a participant who meets at least one of the following requirements.

  • who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (referred to collectively in this notice as COVID-19) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act);
  • whose spouse or dependent (as defined in section 152 of the 5 Code) is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act; or
  • who experiences adverse financial consequences as a result of:
    • the individual being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19;
    • the individual being unable to work due to lack of childcare due to COVID-19; or
    • closing or reducing hours of a business owned or operated by the individual due to COVID-19.
  • In addition, pursuant to the authority of the Secretary to issue guidance to provide for other factors under section 2202(a)(4)(A)(ii)(III) of the CARES Act, a qualified individual for purposes of Notice 2020-50 is an individual who experiences adverse financial consequences as a result of:
    • the individual having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19;
    • the individual’s spouse or a member of the individual’s household (as defined below) being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19, being unable to work due to lack of childcare due to COVID-19, having a reduction in pay (or self-employment income) due to COVID-19, or having a job offer rescinded or start date for a job delayed due to COVID-19; or
    • closing or reducing hours of a business owned or operated by the individual’s spouse or a member of the individual’s household due to COVID-19.

For purposes of applying these additional factors, a member of the individual’s household is someone who shares the individual’s principal residence.

Q4. Does a participant need to be an active employee to be a CVRD Qualified Participant?

A4. No. There is nothing in the Bill that would require the participant to be a current employee to be a CVRD Qualified Participant.

Q6. What kind of documentation does the plan need to obtain to determine that a participant is a CVRD Qualified Participant?

A6. The plan administrator may allow participants to self-certify that they are a CVRD Qualified Participant.

Q7. Where can CVRDs be taken from?

A7. Any “Eligible Retirement Plan” as defined in IRC Sec. 402(c)(8)(b) which includes:

  1. IRA and IRA annuities under IRC Sec. 408(a) and 408(b)
  2. Defined Contribution and Defined Benefit plans under IRC Sec. 401(a)
  3. An annuity plan under IRC Sec. 403(b)
  4. A plan under IRC Sec. 403(b)
  5. A Governmental 457(b) plan under IRC Sec. 457(e)(1)(A)

Q8. How much can be taken in a CVRD?

A8. A participant’s CVRD cannot exceed $100,000 (or their vested account balance) from all plan maintained by the employer. If the employer is a member of a controlled group or affiliated service group this limit will be aggregated over all the plans.

Q9. What are the tax implications of taking a CVRD?

A9. The 10% early withdrawal penalty tax has been waived for CVRD. The pre-tax portion of the CVRD is subject to normal taxation. However, the participant may choose to spread the taxable income evenly over 3 taxable years starting with the 2020 tax filing.

While a CVRD will be treated as an eligible rollover distribution for many plan purposes, the 20% mandatory withholding will not apply.

Q10. Can a CVRD be repaid?

A10. Yes. The participant will have three years starting from the day following the day the distribution was received. The amount can be rolled over following the normal rules for an eligible rollover distribution (ERD) and will be treated as an ERD for plan purposes.

Q11. Does the plan have to be amended before CVRDs are allowed?

A11. No, plans may operationally allow for CVRDs before the plan is formally amended. The amendment deadline is the last day of the plan year beginning on or after January 1, 2022 (or a later date if specified by the Secretary of the Treasury) with an additional two years for governmental plans.

Coronavirus-Related Loan Provisions

Q14. Are there special loan provisions for CVRD Qualified Participants?

A14. Yes. The CARES Act has two main loan provisions:

  1. An increase in the amounts used to determine the maximum loan amount allowed.
  2. A delay in repayment for new and existing loans.

Q15. What are the changes to the loan maximum calculations?

A15. For loans made during a 180-day time frame starting on March 27, 2020, when calculating the maximum loan amount that a CVRD Qualified Participant may take the $50,000 or 50% of vested account balance portion of the calculation is increased to $100,000 and 100% of the vested account balance.

Q16. What are the loan repayment changes?

A16. For a CVRD Qualified Participant who has a loan payment due on a new or existing loan from March 27, 2020 thru December 31, 2020, those payments will be delayed by a year. Loan payments will restart with any payments due on or after January 1, 2021. The skipped payments (and any interest that accrued on those skipped payments) must be repaid starting on the one-year anniversary of the first skipped payment.

When the repayments start, the amount will be adjusted to account for the missed interest. Additionally, the maximum repayment period (5 years for most loans) will be extended by the time frame in which payments were skipped.

Q17. Does the plan have to be amended before the loan provisions are utilized?

A17. No, plans may operationally use the loan provisions before the plan is formally amended. The amendment deadline is the last day of the plan year beginning on or after January 1, 2022 (or a later date if specified by the Secretary of the Treasury) with an additional two years for governmental plans.

2020 RMD Waiver

Q18. What plans can waive the 2020 RMD requirements?

A18. The plan types that can waive the 2020 RMD requirements are:

  1. 401(a) defined contribution plans (this includes 401(k) and profit sharing plans).
  2. 403(a) and 403(b) defined contribution plans.
  3. Governmental 457(b) plans.
  4. IRAs.

Q19. What RMDs are waived?

A19. RMDs that are required to be distributed to participants or beneficiaries in the 2020 calendar year. This includes first year RMDs that have a required beginning date in 2020.

Q20. What about participants who turn 72 in 2020?

A20. 2020 is disregarded in determining the required beginning date so a participant who turns 72 in 2020 will be treated as if they turned 72 in 2021.

Q21. Do plans have to allow participants to waive their 2020 RMD? Can they force participants to waive their 2020 RMD?

A21. While it is unclear from the CARES Act if this is a mandatory or permissible provision, the language used is mostly identical to the language used in WRERA for the 2009 RMD waiver which the IRS determined was a permissible waiver. If the IRS follows the logic they did in 2008/2009 the plan sponsor would have the options to (1) allow their participants the choice to waive their RMD; (2) waive all RMDs that had not already been distributed; or (3) make no change and force participant to take their RMD as set forth in the plan.

Q22. If the participant has already taken their RMD, can they roll it back into a qualified retirement plan or an IRA?

A22. It is unclear at this time if those amounts could be rolled back into a qualified retirement plan or IRA. The ability to do so for the 2009 RMD waiver came from IRS Notice 2009-82.

Please note the information that we are providing is not intended as legal advice or a "legal opinion". You should consult with your legal counsel for a complete and accurate review of the law as it applies to your specific situation. Any U.S. Federal tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties under the Internal Revenue Code or applicable state or local tax law provisions

 

CARES-ACT

The CARES Act and the Solo 401k

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The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted on March 27, 2020 to provide short-term financial relief to those who have experienced adverse financial consequences from the current pandemic. The CARES Act includes expanded provisions for Coronavirus-related distributions and participant loans.

Solo 401k owners can utilize these expanded provisions under the CARES Act if they qualify.  Pursuant to section 2202(a)(4)(A)(ii) of the CARES Act, a qualified individual for purposes of this notice is an individual:

  • who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (referred to collectively in this notice as COVID-19) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act);
  • whose spouse or dependent (as defined in section 152 of the 5 Code) is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act; or
  • who experiences adverse financial consequences as a result of:
    • the individual being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19;
    • the individual being unable to work due to lack of childcare due to COVID-19; or
    • closing or reducing hours of a business owned or operated by the individual due to COVID-19.

In addition, pursuant to the authority of the Secretary to issue guidance to provide for other factors under section 2202(a)(4)(A)(ii)(III) of the CARES Act, a qualified individual for purposes of Notice 2020-50 is an individual who experiences adverse financial consequences as a result of:

  • the individual having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19;
  • the individual’s spouse or a member of the individual’s household (as defined below) being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19, being unable to work due to lack of childcare due to COVID-19, having a reduction in pay (or self-employment income) due to COVID-19, or having a job offer rescinded or start date for a job delayed due to COVID-19; or
  • closing or reducing hours of a business owned or operated by the individual’s spouse or a member of the individual’s household due to COVID-19.

For purposes of applying these additional factors, a member of the individual’s household is someone who shares the individual’s principal residence.

If a Solo 401k owner meets one of the qualifications above, he/she may rely on self-certification. A self-certification form must be completed by the Solo 401k owner and then kept in his/her file as Plan Administrator of the Solo 401k.

Coronavirus-related distribution provisions

  • Up to $100,000 can be taken as a distribution from the plan (if the employer is a member of a controlled group, the $100,000 maximum applies to the aggregated limit over all plans maintained by the controlled group)
  • 10% early withdrawal penalty is waived
  • Normal taxation applies on a distribution of traditional/pre-tax funds
  • Payment of tax on distribution can take place over 3 years, starting with the 2020 tax filing
  • Repayment of entire distribution can be done over 3 years starting with the day after the distribution is received. Repayment can occur through multiple payments or one lump sum payment by the end of those 3 years. If entire distribution is paid back within that time, the distribution will not be taxed.
  • Applies to qualifying distributions taken from January 1 through December 31, 2020

Coronavirus-related loan provisions

The loan provisions of the CARES Act apply to determining the maximum loan amount and delaying the repayment of new and existing participant loans from the Solo 401k.

  • Determining the maximum participant loan amount
    • Applies to a new loan taken between March 27 – September 22, 2020
    • Up to $100,000 or 100% of the participant’s vested account balance, whichever is less, can be taken as a new participant loan
  • Delaying the repayment of new and existing participant loans
    • Applies to loan repayments on new or existing participant loans
    • Loan repayments that are due between March 27- December 31, 2020 may be delayed up to 1 year
    • Loan payments will resume with any payments due on or after January 1, 2021
    • Interest continues to accrue within the repayment period
    • Loan repayments must still occur in level payments; no lump sum repayment can occur at the end of the loan repayment period
    • Skipped payments (plus interest on those skipped payments) must be repaid starting on the 1-year anniversary of the first skipped payment
    • The maximum repayment period will be extended by the time frame in which payments were skipped, e.g. up to 1 year

Action items for Solo 401k owners

  • Determine if you are a qualified individual under the CARES Act
  • If you qualify, complete a self-certification form and keep it in your file
  • If you are a member of a controlled group, track aggregate amounts of your Coronavirus-related distributions so as not to exceed the maximum
  • If you take a Coronavirus-related participant loan, document and track any delayed repayments to the loan
  • If you take a Coronavirus-related distribution, determine and track repayments, if applicable

Sense Financial will continue to update this page as additional guidance from the IRS and the DOL is expected in the future.

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