An often overlooked rule, employer profit sharing self-directed solo 401k Contributions are subject to stringent distribution rules such as the following:
1) The occurrence of a Hardship,
2) The attainment of age 59 ½
3) The employer contributions being withdrawn have been accumulated in the solo 401k plan for at least 2 years; or
4) The participant has participated in the solo 401k plan for at least 5 years.
QUESTIONS:
- I am interested in rolling over the solo 401k employer contributions and earnings in my Solo 401k to a Roth IRA.
- The account was opened in 2017, and contributions were made in 2017 and Dec 26 2018.
- Does this mean I can now withdraw (for rollover to Roth IRA) the entire pre-tax employer contribution account, including all earnings therefrom based on the 2 year accumulation rule?
ANSWER:
- Yes or convert the funds to a Roth IRA.
- For purposes of the 5 year rule, given that the plan was set up in mid-2017 (first contribution May 29, 2017) will I be eligible to rollover the employer pretax balance on that basis January 1st 2022, May 2022, or Jan 1 2023? ANSWER:
- The clock starts as of January 1 regardless of when the in the year the contribution was made; Therefore, yes you could distribute or convert the profit sharing employer contributions in 2022.