Self-employed Roth Individual 401k FAQ – Does restating my Roth Solo 401k restart the 5-year clock?
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QUESTION:
I have a solo 401(k) at E*TRADE using their plan documents opened in 2010. I’m going to switch to my solo 401(k) plan you so much with money still at E*TRADE for the continued support of Mega Backdoor Roth Solo 401k. Am I correct that the five-year clock on Roth Solo 401k Contributions will not be restarted since the 401(k) plan is simply being restated?
RESPONSE:
Great question as we have helped many clients upgrade a basic Solo 401k plan at a brokerage such as E*Trade, Fidelity, or Schwab who want to upgrade their plan to our plan to take advantage of the features and services that we offer including the Mega Backdoor Roth Solo 401k, Solo 401k loans, the fact that we handle required IRS forms (e.g. Form 5500-EZ, 1099-R) for no additional charge, etc.
The process to upgrade the existing Solo 401k is referred to as a restatement which means the plan continues but it is now governed by our Solo 401k plan which allows for the Mega Backdoor Roth Solo 401k contributions, Solo 401k loans, alternative investments, etc.
Since when a Solo 401k plan is restated the plan continues this means that you are correct in your understanding that the five-year clock for Roth Solo 401k contributions does not restate when one restates an existing Solo 401k plan to our plan.
