Unless you are age 59 1/2 or older, which affords you the option to transfer funds out of the pre tax solo 401k to an IRA, the IRS rules required that you meet a triggering event as discussed below before you can gain access to your solo 401k funds for transfer/rollover purposes to an IRA.
Different rules apply based on the account holder’s age and contribution types (e.g., employee versus employer contributions as well as rollover funds).
To transfer/directly rollover solo 401k funds to an IRA, it depends on the type of contribution used to fund the account. Generally, plans funded with employee contributions are less accessible under the law than plans funded with employer/profit sharing contributions as well as voluntary after-tax contributions.
Employer Contributions: Employer contributions may be transferred to an IRA upon the solo 401k participant’s severance from employment. In addition, employer contributions may be transferred/directly rollover to an IRA upon the occurrence of any of the following events:
1) The attainment of age 59 ½
2) The employer contributions have been accumulated in the solo 401k plan for at least 2 years; or
3) The participant has participated in the solo 401k plan for at least 5 years.
After-Tax Contributions and Rollover Contributions. The solo 401k plan participant may transfer/directly rollover the these funds at any time all or any portion of her account balance attributable to “rollover contributions” (e.g., funds that were previously rolled over to the solo 401k plan from IRAs or former employer plans) and/or “voluntary after-tax contributions.”
Salary Deferrals (employee contributions): Any employee contribution (including any earnings on such amounts) may not be transfer/directly rollover prior to the solo 401k participant’s severance from employment. However, the solo 401k plan permits an in-service transfer/directly rollover of such amounts upon attainment of age 59 ½ .
Funds previously transferred to the solo 401k from IRAs or former employer 401k plans may be transferred at any time out of the solo401k to an IRA.
Form 1099-R Reporting Applies
If you meet any of the above requirements and proceed with the partial transfer of the pre tax solo 401k funds to an IRA, a Form 1099-R will need to be issued to report the non-taxale direct rollover of the pre tax solo 401k to the traditional IRA. https://www.mysolo401k.
