Minna Nah

About Minna Nah

Minna coordinates Sense Financial's communication efforts towards educating clients about the Self Directed IRA and Solo 401k. She enjoys the opportunity to work with clients from various backgrounds, experiences, and goals. She strives to ensure that each client’s goals are met through the products Sense Financial offers.

Posts by Minna Nah:

April 10 2017

Can profit sharing contributions be made to my Solo 401k throughout the year?

Minna Nah Contributions, Funding

Can profit sharing contributions to my Solo 401k be made throughout the year, or do I have to wait until the end of the year to make them?

Answer:

Profit sharing contributions can be made throughout the year. However, note that the profit sharing contributions are limited to a percentage of your compensation (25% for corporations, 20% for single member LLCs or sole proprietors) at the time you are making them.

For example, if your compensation (i.e. the wages you take from the company) up to date are $16,000, your corporation can put up to $4,000 in profit sharing contributions.

March 10 2017

How do I terminate my Solo 401k plan?

Minna Nah Distributions, Maintenance

ANSWER:

Terminating your Solo 401k plan includes the following steps:

Distribute all assets of your Solo 401k plan

Distributions may be taxable or non-taxable, depending on the type of distribution taken.

Formally request to terminate your Solo 401k plan

You must submit a request to us in writing for the termination of your Solo 401k plan.

We will issue a Plan Termination package to you

The plan termination package includes two documents which will be emailed to you- the Action by Board of Directors document and the Plan Termination package.

Sign the documents and keep them for your records

Since you are Plan Administrator, you are responsible for keeping all records related to the Solo 401k plan. This includes the termination documents.

Prepare the filing for the year in which the Solo 401k plan was terminated

If you are terminating your Solo 401k Plan this year, you will have to complete the following forms next year. Obtaining, completing, and submitting these forms are your responsibility.

A 1099-R is required for both taxable distributions and non-taxable rollovers. This form must be distributed to the recipient of the distribution in January of the year following the distribution or rollover.
A final 5500-EZ is required for all terminated 401k plans

March 7 2017

What if I want to hire employee(s) in the future?

Minna Nah Adopting Employer, Maintenance, Setup, Solo 401k Eligibility

I know the Solo 401k is only for self-employment businesses without employees (other than the owner). What if I want to hire employee(s) in the future?

Answer:

The Solo 401k plan is an Owner-Only plan. You cannot set up a Solo 401k/ Owner-Only plan if you have full-time employees or long-term part-time employees (Long-term part-time employees are defined as those who work over 500 hours within a 12-month period for 2/3 consecutive years). The only exception is a spouse who also works for the business.

If you would like to hire employee(s) in the future, please remember that the employee must work under 500 hours in a 12-month period. Otherwise, you may become ineligible for the Solo 401k plan.

To ensure compliance, it is important that you, as the employer, do two things:

Notify Sense Financial Services immediately if you have hired an employee (other than your spouse). Having an employee will require your plan documents to contain eligibility criteria. Unless you have notified us, your plan documents do not contain this eligibility criteria. It is important to notify us as soon as possible so your plan documents can be updated to reflect this change.

Keep track of the number of hours that the employee works in a 12-month period. Once the employee hits 500 hours within a 12-month period and does so for 2/3 consecutive years, he/she automatically becomes eligible for the Solo 401k plan. This causes you to become ineligible for the Solo 401k plan.

If you do hire full-time employees who meet the eligibility criteria, you must offer them the same benefits (e.g. a 401k plan). The Solo 401k is not set up to have any other employees besides the owner and his/her spouse. With full-time employees, you will have to terminate the Solo 401k plan and switch to a 401k plan which can include employees.

If you decide to terminate your Solo 401k plan, you will have to file a final 5500-EZ form with the IRS and transfer the funds out to another qualified plan. If you have assets in your Solo 401k plan such as real estate, you will need a self-directed type of plan or account to transfer your funds into. Most retirement plans will not accept assets such as real estate.

Self-directed 401k plans which include employees are expensive to maintain. Though it is possible, you may not want to go that route. Your two best options would then be:

Terminate the Solo 401k plan. Set up a self-directed IRA and transfer all of your assets including real property into it.

Freeze your Solo 401k plan when you have eligible employees. Freezing a plan allows you to maintain your investments and continue to manage it as the trustee. However, you can no longer contribute to the plan. Freezing the plan is meant to be a temporary measure.

March 7 2017

Direct vs. indirect rollover

Minna Nah Funding, Transfers and Rollovers

Should I do a direct or indirect rollover into my Solo 401k?

Answer:

Direct rollovers are strongly recommended for funding your Solo 401k.

Direct rollovers are non-taxable events. The payment is made directly from one retirement plan to another.

While indirect rollovers may be possible, they are not recommended since they can lead to an IRS inquiry on rollover funds. In an IRS inquiry, you as the Solo 401k plan participant would bear the burden of proving that the funds were rolled over, without the benefit of a form to officially document it.

*Note that Form 5498 cannot be used to document an indirect rollover into a 401k plan.

In an indirect rollover, a retirement plan participant first requests a distribution. The retirement funds are received by the participant as a distribution. The participant must then roll the funds over to another retirement plan. An indirect rollover must be completed within 60 days to avoid taxation and penalties.

Because the retirement funds are first distributed to the participant, a distribution will be reported on IRS Form 1099-R. (This will be reflected in Box 7 of the form by code 1 for “Early distribution” or code 7 for “Normal distribution,” depending on the age of the participant).

If the participant rolls the funds over to an IRA, the receiving IRA custodian would be required to report the receipt of the funds through Form 5498. This would serve as documentation that the funds were rolled over into another plan.

However, Form 5498 is not applicable for 401ks. There is no form for a 401k to report the receipt of rollover funds and thus document that the funds were rolled over into the 401k. Form 5498 is only applicable for IRAs. The form would not apply for a Solo 401k.

Direct rollovers are best for Solo 401ks. Our instructions explain how to initiate a direct rollover into your Solo 401k. It’s important to follow our instructions to avoid triggering a taxable event.

November 4 2016

Performing a Roth conversion

Minna Nah Maintenance, Reporting Requirements, Roth Solo 401k, Setup

IMPORTANT: Before performing a Roth conversion, please make sure to educate yourself on the mechanics and consequences of Roth conversions. This is a taxable event. We always recommend that clients speak with their accountant prior to performing a Roth conversion in order to understand the tax consequences.

For information on Roth conversions, we have several articles located in our Knowledge Base regarding the Roth; please see HERE and HERE.

If you would like to perform a Roth conversion, you will need to do the following:

Complete the In Plan Roth Conversion form, located HERE under Miscellaneous Forms.

As Plan Administrator, you will need to keep the original as part of your recordkeeping.

Report the Roth conversion through Form 1099-R. The Roth conversion will be included as part of this year's taxable income.

Note that you are not able to rollover funds from your previous pre-tax account(s) directly into the Roth bracket. If you decide to do the conversion, you will first have to move those funds into the pre-tax portion of your Solo 401k, and then do the conversion and move the funds into the Roth.

Finally, we do recommend keeping the pre-tax and Roth funds separate by opening two separate bank accounts. This is for ease of accounting.

September 18 2014

How do I order checks for the Solo 401k Trust account?

Minna Nah Bank Account, Setup

How do I order checks for the Solo 401k Trust account?

Answer:

There is no special procedure for ordering checks for the Solo 401k Trust. When ordering checks for the Solo 401k Trust, please note the following:

The trust name (e.g. "ABC Solo 401k Trust") must be printed on the checks as the account holder. The trust name should be spelled the same way as it is listed on the plan documents.

The trust name should also be the name on the bank account.

The address listed on the checks should be the address listed on the account. If you’d like a different address printed on the checks, please confirm with the bank first.

The cost of ordering the checks is the expense of the plan and should be paid from the trust's account. (This is NOT a personal expense).

A debit card can be obtained for the Solo 401k Trust bank account. A credit card, however, cannot, as it would be considered a prohibited transaction.

August 22 2014

Opening a Schwab brokerage account for the Solo 401k trust

Minna Nah Assets, Bank Account, Investing

Sense Financial Services provides the plan documents to establish your self-directed Solo 401k plan. Once your Solo 401k plan is established by Sense Financial Services, you have the freedom to set up a brokerage account in the name of your Solo 401k trust at any brokerage firm (e.g. Charles Schwab, Fidelity, E-Trade, TD Ameritrade).

The important thing to remember is that the brokerage firm is not providing or establishing a Solo 401k/ Individual 401k plan on your behalf. While these firms also offer their own Solo 401k establishment service, you have already established your Solo 401k plan through Sense Financial Services.

The role of the brokerage firm is simply to provide a brokerage account for your already-established, self-directed Solo 401k plan. The brokerage firm is not involved in the administration of your Solo 401k. They do not function as custodian, trustee, or fiduciary of your Solo 401k plan.

Your Solo 401k established by Sense Financial Services is structured so that you are the trustee, plan administrator, and fiduciary of your Solo 401k. You have the freedom to self-direct your plan’s investments. Under our Solo 401k, you can invest in both traditional and non-traditional assets, such as mutual funds, real estate, precious metals.

Establishing a brokerage account at a brokerage firm allows your Solo 401k Trust to invest in the traditional assets they offer, such as stocks and mutual funds. Under this arrangement, you can self-direct your Solo 401k with checkbook control while utilizing the investment options of a brokerage firm.

Opening the brokerage account at Charles Schwab

As plan administrator of your Solo 401k, you are able to open a Schwab Company Retirement Account (CRA) for your Solo 401k Trust. The Schwab CRA functions as a brokerage account which holds the assets of your Solo 401k Trust. It is for investment purposes only; Charles Schwab will not do any tax reporting for or administering of your account.

Please visit this page for contact information.

Please click HERE for the forms and instructions for setting up a Schwab CRA.

This will involve reviewing the Schwab ERISA Disclosure, completing the Master Account Application, and establishing a participant account. Please note:

The CRA needs to be set up in the name of your Solo 401k Trust, using the EIN for your Solo 401k Trust.
The CRA needs to be structured as Trustee-Directed.

Once your Schwab CRA is established, it can be funded via transfer or contribution.

Note: Brokerage accounts at other trading platforms (such as Fidelity, E-Trade, etc.) can be set up in a similar way. Please inquire with your brokerage for details.