If you previously worked for an employer and still have funds in a 401(k) plan held at Fidelity Investments, you may be able to transfer those funds into a fully self-directed Solo 401(k) once you become self-employed.
Watch: Complete breakdown of how to transfer a former employer 401k held at Fidelity Investments to a fully self-directed solo 401k
Moving funds from a former employer’s retirement plan into a Solo 401(k) can significantly expand your investment opportunities and provide additional features that many employer plans do not offer.
This guide explains:
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Why you may want to transfer a former employer 401(k)
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Key rules to follow to keep the transfer tax-free
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How to process the rollover from Fidelity
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Step-by-step instructions to complete the transfer properly
Why Transfer a Former Employer 401(k) to a Self-Directed Solo 401(k)?
Many employer retirement plans restrict participants to a limited menu of mutual funds or target-date funds.
By transferring your account to a self-directed Solo 401(k), you can gain significantly broader investment flexibility.
A fully self-directed Solo 401(k), such as those offered by MySolo401k Financial, allows investments in:
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Stocks
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Exchange-traded funds (ETFs)
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Real estate
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Cryptocurrency
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Precious metals
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Promissory notes
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Private equity
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Tax liens
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Life insurance
In addition to expanded investment options, a Solo 401(k) offers several powerful features.
Key Advantages of a Self-Directed Solo 401(k)
Participant Loan Feature
A Solo 401(k) allows participants to borrow up to the lesser of:
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50% of the account balance, or
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$50,000
If both spouses are self-employed in the same business and participate in the same Solo 401(k), each spouse may borrow up to $50,000, depending on their account balance.
Mega Backdoor Roth Strategy
Unlike many employer plans, a self-directed Solo 401(k) can allow:
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Voluntary after-tax contributions
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Immediate conversion to a Roth Solo 401(k)
This strategy is commonly known as the Mega Backdoor Roth and can significantly increase annual Roth retirement savings.
Expanded Investment Control
A self-directed Solo 401(k) often includes checkbook control, allowing participants to invest directly in alternative assets without custodian approval for each transaction.
Important Rules Before Requesting a Transfer
Before transferring a former employer 401(k) from Fidelity to a Solo 401(k), there are several key considerations.
1. The Transfer Must Be a Direct Rollover
The transaction must be processed as a direct rollover (trustee-to-trustee transfer).
This ensures the movement of funds remains non-taxable.
Fidelity will report the transaction on Form 1099-R with Code G, which indicates a direct rollover to another qualified retirement plan.
Importantly:
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The check must not be deposited into your personal bank account.
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It must be made payable to the Solo 401(k) plan, and subsequently deposited into the solo 401k.
2. Separate Checks for Different Types of Funds
If the Fidelity 401(k) contains multiple sources of funds, they must be transferred separately.
Examples include:
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Pre-tax 401(k) funds
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Roth 401(k) funds
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Voluntary after-tax funds
Each source must be issued as a separate check and deposited into the appropriate Solo 401(k) sub-account.
3. Solo 401(k) Sub-Accounts Must Be Established
A Solo 401(k) plan tracks different types of contributions separately.
Typical sub-accounts include:
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Pre-tax account
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Roth account
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Voluntary after-tax account
If both spouses participate in the plan, each participant will maintain separate sub-accounts for each contribution source.
For example:
| Participants | Account Types | Total Accounts |
|---|---|---|
| One participant | Pre-tax, Roth, After-tax | 3 |
| Two participants | Pre-tax, Roth, After-tax (each) | 6 |
If you do not yet have these accounts established, MySolo401k Financial can assist with opening them at a brokerage or bank.
4. Outstanding 401(k) Loans Must Be Resolved
If the former employer plan includes an outstanding participant loan, the loan generally must be repaid before the transfer.
If the loan is not repaid:
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Fidelity may treat the loan balance as a taxable distribution
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The amount may be subject to income tax and potential penalties
5. Investments May Need to Be Liquidated
Before Fidelity can process the transfer, investments in the plan typically must be sold and converted to cash.
Fidelity will then issue the rollover as a check payable to the Solo 401(k).
Step-by-Step Guide to Transfer a Fidelity 401(k) to a Solo 401(k)
Step 1: Contact Fidelity
Call the phone number listed on your 401(k) account statement.
Tell the representative you want to process a:
Non-taxable direct rollover from a former employer 401(k) to a Solo 401(k).
Fidelity generally allows this request to be completed over the phone without submitting forms.
Step 2: Provide Your Solo 401(k) Information
You will need to provide:
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The name of your Solo 401(k) plan
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The plan’s Employer Identification Number (EIN)
If asked for the receiving account number, provide the plan EIN.
Step 3: Ensure Proper Check Payee Instructions
Ask Fidelity to make the check payable as follows:
[Solo 401(k) Plan Name] FBO [Your Name]
“FBO” means For the Benefit Of.
This ensures the rollover remains non-taxable.
Step 4: Request the Check Be Mailed to You
Since you are the trustee of the Solo 401(k), the check will typically be mailed to your address.
You will then deposit the check into the appropriate Solo 401(k) account.
Step 5: Verify the Check Before Depositing
Before depositing the rollover check:
Confirm it is payable to the Solo 401(k) plan, not to you personally.
Step 6: Endorse the Check as Trustee
Sign the back of the check as:
[Your Name], Trustee
[Name of Solo 401(k) Plan]
Step 7: Deposit the Funds into the Correct Sub-Account
If multiple checks were issued:
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Deposit pre-tax funds into the pre-tax Solo 401(k) account
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Deposit Roth funds into the Roth Solo 401(k) account
Each source must remain segregated for reporting purposes.
Can Fidelity Transfer the Funds Internally?
Many investors ask whether Fidelity can move the funds internally to a Solo 401(k) brokerage account held at Fidelity.
Unfortunately, Fidelity generally does not allow internal transfers from a former employer 401(k) into a non-prototype Solo 401(k) brokerage account.
Instead, Fidelity will issue a check payable to the Solo 401(k), which must then be deposited into the plan account.
Final Thoughts
Transferring a former employer 401(k) from Fidelity to a self-directed Solo 401(k) is typically a straightforward process when handled properly as a direct rollover.
Key steps include:
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Requesting a trustee-to-trustee transfer
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Ensuring separate checks for each fund source
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Depositing funds into the correct Solo 401(k) sub-accounts
When structured correctly, the rollover remains completely non-taxable and allows you to unlock the powerful features of a self-directed Solo 401(k), including expanded investment flexibility, participant loans, and advanced Roth strategies.
For clients of MySolo401k Financial, our team can assist with:
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Establishing the necessary Solo 401(k) brokerage accounts
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Coordinating the rollover with Fidelity
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Ensuring funds are deposited correctly into the plan
If you have a former employer 401(k) at Fidelity, transferring it into a self-directed Solo 401(k) may be one of the most powerful ways to gain full control over your retirement investments.
