Transfers and Rollovers

January 2 2021

Accounting within your Solo 401k

Minna Nah Bank Account, Contributions, Funding, Maintenance, Setup, Transfers and Rollovers

As Plan Administrator of your 401k, you are responsible for tracking the funds of your 401k. The monies in your 401k should be kept accounted for separately.

Types of monies include:

Rollover(s)
Employee salary deferral contribution(s)
Employer profit sharing contribution(s)
Roth contributions
etc.

You will need to establish a clear accounting method to keep track of each type. Accounting will include the incoming amount(s) as well as the transactions and investments for each. The format for tracking and accounting is up to you. You can use any type of accounting software, such as:

Excel spreadsheet
QuickBooks
Quicken
Mint (online software)

December 12 2017

Inherited IRA

Dmitriy Fomichenko Maintenance, Transfers and Rollovers

I inherited a 401k from my mother who passed away. The current financial institution told her that unless there was an inheritance clause for rollover allowed in the 401k, that they could not authorize a rollover and it would need to be cashed out. Can this inherited account be rolled over into my Solo 401k plan?

Answer:

A 401k that you inherited can not be rolled over into your personal Solo 401k or IRA. It can only be rolled over into Inherited IRA, you can find the details explained at the following link on the IRS website:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary

Basically, the new Inherited IRA has to be setup in the name of the deceased, with you as the beneficiary. You will have the control over the account and will be subject to RMD. If you need any further guidance on this please consult with your CPA.

August 4 2017

Transfer an annuity into my Solo 401k

Dmitriy Fomichenko Funding, Transfers and Rollovers

How do I transfer my IRA annuity into my Solo 401k?

Answer:

An annuity is simply an investment of an IRA. IRS rules allow you to transfer any IRA (except Roth) into your new Solo 401k plan.

In order to do so, you will need to contact the company holding your annuity and sell or liquidate it. Then you can simply request a Direct Rollover of your IRA into your Solo 401k plan.

The rollover instructions and form are located here:

Transfer/Rollover

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 1 2016

Can my wife transfer her 401k from a former employer to my Solo 401k plan?

Dmitriy Fomichenko Transfers and Rollovers

Answer:

No, she cannot rollover her retirement funds into your account. All retirement accounts are individual and tied to a Social Security Number, so she would not be able to rollover her IRA or 401k into your individual account. (The only exception would be upon death).

However, your wife can participate in your Solo 401k if she is also employed by the business. If she participates in the Solo 401k, she can have her own participant account. She can then rollover her IRA or 401k into her own account under the same Solo 401k plan.

March 25 2016

Can I rollover a foreign pension plan to a Solo 401k?

Dmitriy Fomichenko Funding, Transfers and Rollovers

I have a UK personal pension. Essentially, it’s the same format as the 401k. Do you have any experience/information on if and how I could roll that into my Solo 401k?

Answer:

Foreign pension plans cannot be rolled over to a U.S. IRA or Employer Plan.

October 8 2014

My rollover was incorrectly reported as normal distribution on Form 1099-R

Dmitriy Fomichenko Funding, Transfers and Rollovers

When I set up my Solo 401k, I contacted my custodian to request a direct rollover from my existing IRA into my Solo 401k. Now the custodian sent me Form 1099-R for the rollover. Is this correct? If it’s reported as a distribution, how do I correct it?

Answer:

When you request a rollover, the custodian reports the transaction to the IRS by issuing Form 1099-R.

First, check the 1099-R to make sure it was completed correctly.

CORRECT

Box 1: Rollover amount
Box 2.a: Should be “0.00”
Box 7: Should be “G”

Code G is for a “Direct rollover of a distribution to a qualified plan.” If the custodian entered “0.00” in Box 2.a. for the taxable amount and “G” in Box 7 for the Distribution code, they are telling the IRS that a direct rollover was performed and it was a non-taxable event. This is correct.

INCORRECT

Box 2.a: Anything other than “0.00”
Box 7: Anything other than “G”

If the custodian entered anything other than “0.00” in Box 2.a. for taxable amount, it is incorrect. Or, if the custodian entered a code other than “G” in Box 7 for Distribution code, it is incorrect.

If the 1099-R was not issued correctly, the custodian either did not process your request for a direct rollover correctly or misreported it on the 1099-R.

Contact the custodian and request that they reissue a corrected Form 1099-R.
Alternatively, you can request help from your CPA. Give the 1099-R to your CPA and inform him/her that the funds were rolled over directly into your 401k plan. Your CPA may properly offset that on your tax return by indicating that the funds were deposited into a qualified plan. In this case, the IRS will likely contact you asking you for proof that the funds were rolled over into your 401k. Proof would include a bank statement for your 401k trust account showing the deposit of funds, your plan documents with IRS Determination letter, and a letter of explanation.

Note: IRS Form 5498 cannot be used to correct this error as it is not applicable to direct rollovers into a 401k.

Form 5498 is used for an indirect or 60-day rollover, in which a distribution is taken from your IRA and then deposited into another IRA within 60 days. This form is not applicable for the 401k and for direct rollovers. It is only applicable for IRAs.

December 19 2013

Transferring a Fidelity Solo 401k to a Sense Financial Solo 401k

Dmitriy Fomichenko Assets, Bank Account, Funding, Investing, Setup, Transfers and Rollovers

I have a Solo 401k Plan which I originally established at Fidelity. However, I don't like being limited to only the investment options they offer. How do I transfer it to a new self-directed Solo 401k with checkbook control set up by Sense Financial?

Answer:

You would first need to have Sense Financial restate your plan documents. Our plan documents name you as trustee and allow you to invest in alternative investments such as real estate, precious metals, etc., in addition to stocks and mutual funds with a brokerage.

With your restated plan documents from Sense Financial, you can then open a new account at Fidelity for your restated Solo 401k. This new account would be need to be established as a non-prototype account. Fidelity would not function as custodian with this new account.

You will also need to notify Fidelity that you have had your Solo 401k plan restated. You can request that your existing plan be transferred internally to your new account set up for your restated Solo 401k. This would be considered transfer in kind by Fidelity. Therefore, there will be no charges to you because you will not be selling your assets.

November 1 2013

Are there any options to get Roth funds under my control?

Dmitriy Fomichenko Funding, Roth Solo 401k, Setup, Transfers and Rollovers

If you have Roth 401k funds, you can roll them over into the Solo 401k Roth sub-account.

If you have Roth IRA funds, the only way to get them under your control is to withdraw from the Roth IRA account or to transfer them into self-directed Roth IRA. Please contact us for details.

November 1 2013

Rollover Multiple Plans Into Separate Accounts?

Dmitriy Fomichenko Funding, Transfers and Rollovers

I have an IRA Fidelity which is invested in the money market and a 401k withh ADP from the previous employer. I'd like to rollover those funds into my new Solo 401k. Does the money from IRA have to be kept separate from the funds from the 401k?

Answer:

No, all of the rollover funds may be rolled into the same bank account. You will, however, need to setup separate accounts for each type of money, for example: rollovers, employer profit-sharing contributions, elective deferrals and Roth deferrals.