How to Upgrade ADP Solo 401k to Allow Mega Backdoor Roth

Watch: How to restate your ADP Solo 401k to unlock the Mega Backdoor Roth and other advanced features

If you currently have an ADP Solo 401k (also marketed as the ADP Individual 401k) and you want to take advantage of advanced features like the Mega Backdoor Roth, participant loans, in-plan Roth conversions, or alternative investments such as real estate and cryptocurrency, the good news is you don’t have to shut down your existing plan and start over. Instead, you can restate your ADP Solo 401k by adopting the plan documents offered by My Solo 401k Financial. This guide walks you through how the upgrade works, what features it unlocks, and how to claim up to $1,500 in SECURE Act tax credits in the process.

Are You Eligible for a Solo 401k?

Before upgrading, the foundation is confirming that you remain eligible for a Solo 401k. There are two parts to the eligibility test.

1. You Must Have Self-Employment Activity

You must report self-employment activity on your tax return. The way you report this depends on how your business is organized:

Business Structure	Where Self-Employment Income Is Reported
Sole Proprietor (no formal entity)	Schedule C of Form 1040
Single-Member LLC (disregarded entity)	Schedule C of Form 1040
S-Corporation or C-Corporation	W-2 wages from the corporation
Partnership	Line 14 of Schedule K-1

2. No Non-Owner, Non-Spouse Full-Time W-2 Employees

The second half of the eligibility test is that you cannot have any non-owner, non-spouse full-time W-2 employees. A full-time employee is defined as someone working 1,000 hours or more per year, or 500 hours or more per year for two consecutive years.

✅ Example: You can have independent contractors, a working spouse, or other business owners involved in the business and still qualify for a Solo 401k. Contractors are self-employed themselves, so they don’t disqualify you.

Why Plan Documents Are the “Brain” of Your Solo 401k

Just because you’re eligible for a Solo 401k doesn’t mean you automatically have access to all of its advanced features. What you can actually do inside the plan is dictated by your plan documents.

Your ADP plan documents are designed for ADP’s ecosystem and don’t include features like the Mega Backdoor Roth. To unlock those features, you can restate your plan — think of it as a “cut and paste” operation where the existing ADP plan documents are replaced by the more flexible plan documents from My Solo 401k Financial.

ℹ️ Info Highlight: A restatement does not close your existing Solo 401k. The plan continues — only the governing documents change. This preserves the plan’s original effective date and history.

Features Unlocked by Upgrading from ADP

Once your plan is restated with My Solo 401k Financial’s documents, the following advanced features are baked in automatically:

Feature	What It Means for You
Mega Backdoor Roth	Make voluntary after-tax contributions and convert them to Roth — up to the full $72,000 overall limit for 2026.
Participant Loans	Borrow up to 50% of the account balance, capped at $50,000.
In-Plan Roth Conversions	Convert pre-tax balances to Roth — useful for timing market downturns.
Alternative Investments	Invest in real estate, cryptocurrency, precious metals, private equity, pre-IPO stock, and more.
SECURE Act Tax Credits	Claim up to $1,500 in tax credits ($500/year for 3 years).
Open Custody Model	Open accounts at the bank or brokerage of your choice — Fidelity, Schwab, or hundreds of banks.

Step-by-Step: How to Upgrade Your ADP Solo 401k

Step 1: Submit the Restatement Application

Begin the upgrade on the My Solo 401k Financial website. The application is just 10 simple questions. One of those questions asks whether you already have a plan — answer “yes,” indicate that your existing plan is at ADP, and provide the original effective date.

Step 2: Documents Are Drafted Same Business Day

Once the application is submitted and payment is made, restated plan documents are prepared within the same business day. You’ll receive an email with a link to a secure document portal where you can download the documents drafted specifically for your business.

Step 3: Sign Documents and Complete Next-Steps Questionnaire

Upload the signed signature pages through the same portal and complete the next-steps questionnaire, where you indicate where you’d like to open the new accounts (Fidelity, Schwab, a bank, etc.).

Step 4: Open New Accounts at the Bank or Brokerage of Your Choice

Because the plan is now governed by new documents, the brokerage requires that new accounts be opened. My Solo 401k Financial works hands-on with you to get those accounts set up. Many customers prefer Fidelity for its online application process and electronic funding options, while Schwab is a popular second choice.

Step 5: Transfer Cash from ADP to the New Accounts

Once the new accounts are open, you’ll need to liquidate the investments held in your ADP Solo 401k accounts. Based on customer experience, ADP typically transfers funds via wire, so the assets must be in cash before they’re moved over to the new accounts at Fidelity, Schwab, or wherever you’ve chosen.

⚠️ Important: Because ADP transfers funds via wire, plan accordingly with your investment liquidation timing — and confirm wire instructions carefully with the receiving institution to avoid delays.

How the Mega Backdoor Roth Works After You Upgrade

The Mega Backdoor Roth is a two-step strategy that becomes available once your ADP plan is restated:

Step	What Happens	Tax Reporting
Step 1: Voluntary After-Tax Contribution	Contribute up to 100% of self-employment compensation, dollar-for-dollar, into a separate voluntary after-tax sub-account — up to the overall $72,000 2026 limit (assuming no other contributions).	Not reported on personal or business tax return; not on the W-2.
Step 2: Convert to Roth	Move the voluntary after-tax funds to a Roth Solo 401k or Roth IRA.	Reported on Form 1099-R (typically not taxable, except for any small gains accrued before conversion).

✅ Example: If a solopreneur has at least $72,000 of self-employment compensation in 2026 and makes no other contributions, they can route up to $72,000 into the voluntary after-tax account and immediately convert it to a Roth Solo 401k or Roth IRA — supercharging the tax-free growth bucket.

My Solo 401k Financial prepares the required Form 1099-R at no additional charge — customers or their advisors simply submit the conversion details through an online form in a timely fashion.

Claim Up to $1,500 in SECURE Act Tax Credits

My Solo 401k Financial was the first Solo 401k provider to offer plan documents that allow the solopreneur to claim $1,500 in SECURE Act tax credits. The credits are $500 per year for three consecutive years, and they’re tax credits — not deductions — meaning a dollar-for-dollar reduction in tax liability.

To qualify, the plan must include an auto-enrollment feature and certain participant notices, both of which are automatically included when My Solo 401k Financial drafts your documents. Importantly, these credits are available even for plans that are upgraded from another provider — including ADP.

ℹ️ Info Highlight: $1,500 in tax credits more than covers My Solo 401k Financial’s fees for the first seven years of the plan combined.

My Solo 401k Financial Pricing

Fee	Amount	When Charged
Establishment / Restatement Fee	$525	Year 1 (one-time)
First-Year Annual Fee	$125	Year 1 (bundled into the $650 initial cost)
Ongoing Annual Fee	$125	Charged 12 months later (covers Year 2 and beyond)

Open Custody Model: Freedom of Platform

One of the biggest advantages of upgrading from ADP is the open custody model. My Solo 401k Financial does not hold or have access to your funds. Instead, you obtain the plan documents and ongoing compliance support — including Form 5500-EZ filings and Form 1099-R preparation — and then open accounts at the institution of your choice.

Customers commonly open:

Brokerage accounts at Fidelity or Schwab for stock, ETF, and mutual fund investing.
Bank accounts at any of hundreds of banks for alternative investments such as real estate, cryptocurrency, precious metals, and private placements.
Both a brokerage and bank account when they want to mix traditional and alternative investments.

Frequently Asked Questions

Do I have to close my ADP Solo 401k to upgrade?

No. The upgrade is a restatement, which means your existing Solo 401k continues — only the governing plan documents change. The original effective date is preserved.

Will I need to open new accounts?

Yes. Because the new plan documents replace the ADP documents, the receiving brokerage (e.g., Fidelity or Schwab) requires new accounts that are governed by My Solo 401k Financial’s plan documents. We help you open these accounts as part of the process.

Is there a preferred custodian for the Mega Backdoor Roth?

My Solo 401k Financial is custodian-neutral. That said, Fidelity is the most popular option due to its online process, brand visibility, and broad funding options (including electronic funding). Schwab is a strong second choice.

How quickly can I start the upgrade?

You can begin the same business day. Submit the 10-question application online; once payment is made, the restated plan documents are prepared the same business day.

How are funds moved from ADP to the new accounts?

Based on customer experience, ADP transfers funds via wire. You’ll need to liquidate investments inside your ADP accounts first, then ADP will wire the cash to the new accounts opened under your restated plan.

Ready to Upgrade Your ADP Solo 401k?Unlock the Mega Backdoor Roth, participant loans, in-plan Roth conversions, alternative investments, and up to $1,500 in SECURE Act tax credits by restating your plan with My Solo 401k Financial.

Next Steps: Get Started Today!

Remember: This information is provided for educational purposes only. Always consult with qualified tax, legal, and investment professionals before making investment decisions with your retirement funds.