Solo 401k Retirement Creation for CEO

QUESTION:

I am the co-founder and CEO of a company.  I am on payroll as an employee, and we don’t yet have a retirement vehicle setup for our employees (we hope to by mid-2018).
My questions has to do with my personal situation.  Do you offer a retirement vehicle, other than my personal Roth IRA, that I can leverage as a separate retirement account?  I’ve looked at SEPs and SIMPLE Roth accounts and Solo 401K but I don’t believe any of those would apply to my situation.

ANSWER:

In short – there are no other options as there is no way around offering the plan to your employees.
However, if your looking to self-directed your retirement funds, you can  explore investing your retirement funds in alternative investments such as real estate, promissory notes even bitcoin via an IRA LLC as this can be done without any impact to your employees.

Transfer/Restate Ascensus Solo 401k to a Self-Directed Solo 401k

Those existing solo 401k clients of Ascensus that want to convert their existing solo 401k plan to a self-directed solo 401k that will allow for checkbook control for investing in alternative investments such as bitcoin, real estate, metals, tax liens, and private equity can do so by restating their Ascensus solo 401k plan to a self-directed solo 401k from My Solo 401k Financial.

When an existing solo 401k plan is restated to a self-directed solo 401k plan from My Solo 401k Financial, the following Ascencus forms apply, which we will fill-out as part of the self-directed solo 401k process:

  • Individual (K) Termination Kit/ Plan Conversation Form (3 pages)
  • Plan Termination Payout Request Form (4 pages)

The above forms get submitted to Ascensus once you setup the self-directed solo 401k with us which starts by you completing our on-line self-directed solo 401k application.

We will then assist you in opening a bank account or brokerage account for your self-directed solo 401k. To learn more about the differences and similarities between the bank account and the brokerage account, VISIT HERE.

Highlights for Business CPA -Business Financing 401k (ROBS) 401k

While the 401k provider will take care of annual compliance items related to the business financing 401k (ROBS 401k), the business CPA should be aware of the following main items:
  • The ROBS 401k funded business must be and remain a C-Corporation and NOT be an S corp as long as the 401k owns equity in the corporation.
  • Ownership will be via (i) 401k for your benefit and (ii) you personally since you will invest at least 1% of your personal funds in the C-corporation.
  • Any compensation that you receive for the work performed needs to be paid as w-2 wages
  • No personal loans to company.
  • No interact between the ROBS 401k funded business and other businesses that you own.
  • Your only relationship should be w-2 employee and owner of the company.

November 2017: House Passes Tax Bill But Does Not Yet Affect Solo 401k Plans

While the House of Representatives recently passed a tax bill that would affect IRAs and retirement plans such as solo 401k plans, it is not final until the Senate approves it.

Here are some of the proposes changes in the tax bill that would affect retirement accounts.

1. No more Roth IRA re-characterizations. While re characterizations do not apply to Solo 401k plans, they do apply to IRAs. Under the pending tax bill, those that convert their pretax or after-tax IRAs to a Roth IRA will no longer be able to change their mind and reconvert back to an IRA.

2. No more contributions to both 457 plans and 401k plans including solo 401k plans. Under current law, one can maximize both 457 plan and solo 4o1k contributions, allowing one to essentially double up on contributions. The pending tax bill would eliminate this.

Following are some of the proposed changes that are NOT  in bill:

Source: https://www.wsj.com/articles/the-tax-bill-and-your-retirement-savings-whats-in-and-whats-not-1510859163

Mandatory Roth 401(k) catch-up contributions

  • Currently, employees under age 50 can save up to $18,000 a year in a 401(k)-type plan before taxes, while those 50 or older can set aside up to $24,000.
    Under an amendment introduced recently by Sen. Orrin Hatch (R., Utah), anyone eligible to put in an amount above $18,000 would have to do so in a Roth account, which unlike a 401(k) offers no upfront tax deduction but instead allows the money to be withdrawn tax-free.
  • This amendment wasn’t included in a list of modifications to the bill backed by the Senate Finance Committee chairman on Wednesday.
  • To make the change more palatable, the amendment would have raised the catch-up contribution limit from $6,000 to $9,000 a year, Ms. Borland says

 Elimination of 401(k) catch-up contributions for high earners

  • As originally proposed, the Senate bill would have done away with the extra $6,000 workers age 50 and older can contribute each year to 401(k)-type plans—but only for those with salaries of $500,000 or more. Lawmakers have removed the provision.

 A 10% penalty on early withdrawals from 457 plans

  • People who withdraw money from most 401(k)-style plans before age 59½ must pay income tax plus a 10% early withdrawal penalty on the money. Thanks to a quirk in the law, the 10% early withdrawal penalty doesn’t apply to 457 plans. While the original Senate bill would have imposed the 10% penalty on 457 plans, the Senate Finance Committee chairman removed that measure from the bill Wednesday.

New LLC Creation for Solo 401k and my husband’s IRA

I emailed last month about creating a new LLC that would have 2 members – my Solo 401k and my husband’s IRA. Both retirement funds would contribute (different amounts) so that we could purchase 1-2 properties.

We would like to have your company create that LLC for us.  I do have a couple of questions:
Q 1.  Price was $1,100 – correct?  How do we pay? Can the Solo 401k, IRA pay or personal funds?

ANSWER:

Correct that our pricing is $1,100 (covers both the IRA and the existing solo 401k with us if invested in the same LLC), but not the state registration fee which will be charged by the state directly. Our fee is paid by credit card. Note that you will need to file a Form 1065, and a K-1 for each the IRA and solo 401k if both are invested in the same LLC.  See the following: https://www.mysolo401k.net/single-member-ira-llc-multi-member-ira-llc/
Q 2.  We would like the check writing ability, bank account, etc.  We can set up with the bank we already work with here. Just need to know when to do that in the process.

ANSWER:

Yes the bank account for the LLC can be setup at the local bank once the LLC has been registered and the IRS assigns the EIN. We would provide more info once this step has been reached.
Q 3. Also, the funds have to be transferred to the IRA and Solo at a certain time.  Are you able to guide us through when to do that?

ANSWER:

Yes we will as part of our ongoing compliance support.
Q 4.  Name – we are thinking to name it a particular name – the name is available according to the Colorado Sec of State website.

ANSWER:

Yes provided that name is still available when we go to register the LLC.

Can I transfer Existing Solo 401k Funds to an IRA?

QUESTION:

Will I be able to rollover some of my 401k solo funds to another trading IRA account ?

ANSWER:

The solo 401k already allows for investing in stocks or mutual funds, so we can assist you in opening a Fidelity or Schwab brokerage account, for example.
However, if you still want to transfer some of your solo 401k funds to an IRA,  the type of solo 401k funds you can directly rollover will be dependent upon the source of those funds. While a direct-rollover is non-taxable, it is considered a type of a distribution under the rules.  Therefore, the distribution rules as outlined in the following links would apply and are dependent upon whether the funds you wish to directly rollover stem from  (i) After Tax and Rollover contributions (2) Employer Contributions, or (3) Employee contributions, and/or whether certain triggering events apply.  Please let us know if you will  process a direct-rollover to an IRA so we can guide through the process (as we would need to prepare a form 1099-R with regard to the direct-rollover for reporting purposes.)
Please review the links provided below and email me if you have any additional questions, or we can set up a time to discuss further.

 

 

Transfer QDRO to solo 401k or self-directed IRA?

QUESTION:

I am in the process of getting divorced.  My soon-to-be-ex has a 401K through his employer.  It is anticipated that this will be divided in some manner using a QDRO.  I would like to know what my best options are – can I roll it over to a solo 401K or would a self directed IRA be better?  I am interested in in real estate investments & flipping houses.

ANSWER:

Yes the rules allow for the transfer of QDRO 401k funds to a solo 401k an/or a self-directed IRA. Also, both the solo 401k and self-directed IRA allow for investing in physical real estate.
Not everyone qualifies for a solo 401k, however, since not everyone is self-employed. However, the self-employment requirement does not apply to self-directed IRAs.
To learn more about the solo 401k self-employment rules, CLICK HERE.
To learn more about the similarities and differences between the solo 401k and self-directed IRA, please visit the following link. https://www.mysolo401k.net/self-directed-solo-401k-vs-self-directed-ira/

Self-Directed 401k for LLC Self-Employed Business

BACKGROUND & QUESTION:

I currently have a 401k with my previous employer in a Voya account. I started an LLC recently in PA and was considering options for setting up a self directed 401K, and came across your website. This LLC is brand new and I am currently the only employer.
My primary interest is in having check book access to the funds for real estate and other non-traditional investments, as well the ability to take a loan out.
Do you have any guidance on how to obtain a self-directed 401k to achieve these goals?

ANSWER:

If you are operating a self-employed business (e.g. providing goods or services), you can certainly set up a solo 401(k), as any entity type including an LLC may be sponsor a self-directed 401k provide the entity is offers goods or services. Moreover, our solo 401(k) plan would allow you to invest in real estate and other alternative investments, take a loan, as well as a free checkbook account. As part of our services (for no additional charge), we would handle the transfer from your former employer plan at Voya, preparing all the required loan documents among many other services.

Can I Transfer a Thrift Savings Plan (TSP) to a ROBS 401k?

I am currently employed by the federal government and have a TSP account.  I am preparing to leave my job in November or December to start a new retail business specializing in outdoor gear and apparel.  I have done extensive research on the ROBS process and believe that it is a good option for this enterprise. I do have a few questions

QUESTION 1.

Do you have experience preforming the ROBS transactions from TSP accounts?

ANSWER:

Yes the IRS rules allow for the transfer of a TSP to a 401k and a ROBS falls under the 401k or define contributions umbrella. We will handle the transfer process (including completing all of the necessary paperwork).  As part of our process, the administrator of the TSP will provide the transfer paperwork (Form TSP-70-T, or TSP-70 if you want to process a full transfer) or  to rollover funds from your TSP to your new employer ROBS 401(k) plan (which paperwork we would complete as part of our services).

QUESTION 2.

If I was planning to leave my job on 11/24 for example, How soon prior to that date should I engage your services?

ANSWER:

We can start the process at any time (although you will not be able to transfer the funds from your TSP until you leave your job).  For example, we can set up the Corporation now (which you may find beneficial from a business perspective – e.g. to enter into contracts in connection with the outdoor gear and apparel business, etc.) and then proceed with the rollover in November.  To learn more about the benefits of a phased approach HERE.   If you prefer to wait until November, we would suggest starting around the middle of November. 
  • 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 wells as alternative investments such as real estate, private companies, promissory notes, precious metals, tax liens and equities.
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