Setup

Is the 401k Trust revocable or irrevocable?

Answer:

Revocable and irrevocable trust are terms that are usually applied to a personal trust – one that an individual would set up for estate planning purposes. Those terms are not applied to a qualified plan’s trust, such as the one that is established for a 401(k) plan or a profit sharing plan.

A qualified plan’s trust is similar to an irrevocable trust in that once contributions go into a qualified plan trust, those monies must remain in the trust until distributed to participants, or, for a defined benefit plan, sometimes upon plan termination, if there are surplus assets.

A qualified plan’s trust is similar to a revocable trust, though, in that the plan sponsor (sponsoring employer) and/or the document sponsor may amend the terms of the trust document. Participants (those who would be considered the beneficiaries of the trust) do not consent to the changes to the terms of the trust document.

How do I prove my Solo 401k is a qualified plan?

Answer:

The absolute best proof that your plan is a qualified plan in the eyes of the IRS is the IRS determination (or IRS opinion) letter that we supplied with your Solo 401(k) plan. The letter is from the IRS and shows that the 401k meets the IRS guidelines for a qualified plan.

The plan’s qualified status is what allows you to receive your tax benefits including:

• tax deductions on new non-Roth contributions to the plan
• tax free distributions on Roth Solo 401k funds
• tax free rollovers from existing retirement funds

How should I sign and date my Solo 401k plan documents?

Answer:

When you receive your Solo 401k plan documents, you will need to sign several documents on the signature line. Unless requested otherwise, you will need to sign for the following roles:

• Plan participant
• Trustee
• Administrator
• Employer

You may notice the plan effective date may be January 1 of the current tax year. This is to take maximum advantage of the benefits during this tax period and to keep your plan year to match the calendar year.

When inserting the date for your signatures, you should enter the Adoption date as specified in the plan documents. Keep in mind that these documents should be signed prior to opening bank accounts, initiating transfers, or initiating any transactions for your Solo 401k trust.

What should I do if my address on the Adoption Agreement changes?

Answer:

The primary purpose of the addresses listed for the plan within the plan documents are to provide contact information of the parties (i.e. the employer, administrator, participants and trustee).

If your address changes, you don’t need to necessarily restate the plan documents (which would require a restatement fee).

Because you are most likely all parties (employer, administrator, participant, and trustee), you shouldn’t have any issues knowing how to contact yourself.

If you’d like to go the extra mile in terms of notifying yourself, feel free to write yourself a letter declaring your change of address. You can write the letter as the administrator to the participants.

Please enter the date that you are signing the pages. Signing the pages is what brings your 401k plan and 401k trust into existence so you need to make sure you sign the signature pages before you do anything that requires the existence of the 401k or trust.

The EIN number that was assigned to me during the set up of my Solo 401k account, it appears to be assigned to my trust. I thought it was supposed to be assigned to my business.

Answer:

The EIN number is for your trust. As you use your Solo 401k, it is the Solo 401k trust that is transacting and acquiring and dealing with assets, not your business. Therefore, your trust EIN number will be associated with those transactions.  Your business should have a separate EIN.

I currently live outside the US and I want to add my accountant as co-trustee. Is there a way to indicate in the plan documents that the co-trustee is responsible for administrative matters only: Keeping the trust books, filing tax returns, issuing checks, etc. regarding the plan and not expected to make or control investment decisions which would be the responsibility of the primary trustee?

Answer:

The role of trustee is to be responsible for the investments of the plan. It is not recommended to give that role to somebody who you don’t want to have that responsibility.

If you want to hire your accountant to keep books, nothing further is required inside of your plan. Your role as administrator and trustee means that you are responsible for keeping the books. If you want to hire a CPA or an accountant to do some of the things in terms of record keeping, you can do that without adding them to the plan.

In several places in my plan documents, I noticed references to Sense Financial Services.  So is the plan mine or Sense Financial's?

Answer:

The plan is yours. Anytime you see an instance with our name, what that’s referring to is our document system. You chose our document setup for the solo 401k.

What we do is have our 401k documents that are created and registered specifically with the IRS with what’s called a “prototype document”. This basically means that we submitted our document for review by the IRS and the IRS gave us an opinion letter saying that the prototype document does create a qualified 401k plan. Anyone using the plan has to register a serial number for it that ties it into the document to use it with this pre-approved plan.

You’ll notice when you got your plan documents, you got an IRS opinion letter. You’re covered by that and that’s why you see our name in the documents.