Good Solo 401k Loan Payment Questions

In prepping for making solo 401k participant loan payments, I have a few questions.

QUESTIONS:

1. I used a deposit slip that came with the solo 401k non-prototype account brokerage account checkbook.
Is there a specific Fidelity form or some other deposit slip required? ( I am nowhere near a Fidelity branch)
2. Do solo 401k loan payments need to be deposited by the due date, or is postmarked okay?
3. Or can I set up an electronic transfer for the loan payments (do you prefer the check physical paper trail)?
4. If I had more 401 funds can I make another 100k non-prototype and do another 50k 5 year loan?
5.OR… do you know of another engine to access 401 monies without early withdrawal penalties?

ANSWERS:

No you are not required to use Fidelity’s deposit slip  to document the loan payment. Instead, make the check payable in the name of the solo 401(k) plan, on the memo section of the check write your Fidelity non-prototype brokerage account number for the solo 401k and write “solo 401(k) participant loan payment.” Alternatively, instead of making the loan payments by check, you can setup direct deposit from your personal checking account since the loan payments must be made with personal funds. Regarding making direct deposits into the Fidelity non-prototype brokerage account, they can be made by ACH/direct deposit . See the following link that explains the process.

https://www.fidelity.com/cash-management/deposit-money/overview

Regarding the date that each solo 401k loan payment is due, while the IRS allows a very generous grace period (see below), the rule of thumb is to submit the loan payment so it arrives by the due date listed on the solo 401k loan payment schedule that we prepared.

Solo 401k Loan grace period for late payment

Effective January 1, 2002, Treas.Reg.1.72 (p)-1, Q&A 10, provides for a cure period that allows a loan participant to avoid an immediate deemed distribution following a missed payment. The cure period may not extend beyond the last day of the calendar quarter following the calendar quarter in which the required payment was due.

Unfortunately, the IRS regulations do not allow you to setup multiple solo 401k plans and then to borrow $50K from each. This is actually an audit red flag. In short, the solo 401k loan maximum of being able top borrow 50% of your solo 401k balance applies to all solo 401k plans across the board not to each plan. To learn more about the solo 401k regulations, CLICK HERE.

Lastly, not there is not other retirement vehicle out there that will allow you to borrow more then what a solo 401k plan allows for. However, if you have a former or current employer 401k with a full-time employer, you may be able to also borrow from that 401k because it is not considered a solo 401k that is sponsored by your business but rather by that employer.

Tags: , , ,

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

  •  

  • Popular Video

  • ROBS 401k Funding Process

  • Solo 401k Contributions Including Mega

  • Checkbook IRA LLC

  • About MySolo401k

    We help our clients take control of their retirement money. Our products and services provide our clients the freedom to invest their retirement savings in their own business as well as alternative investments such as real estate, private companies, promissory notes, precious metals, tax liens and equities.
    Learn more

    Connect with us

  • We’re here to help.

    Call: 800-489-7571

    Monday-Friday

    8:00 am - 4:00 pm PT

    Why us?
MENU