Sanders College for All Act Mentions Using Tax on Financial Transactions to Cover College Expenses

While it probably won’t go anywhere, U.S. Senator Bernie Sanders (I-VT) mentioned in the “College for All Act” using funds from the financial transaction tax (this tax has not yet been approved either) to no only pay off al student loan debt, bu to also eliminate tuition and fees at all public four-year colleges and universities, as well as make community colleges, trade schools and apprenticeship programs tuition- and fee-free for all.

Sanders press release goes on to say that the estimated $2.2 trillion cost of the bill would be paid for entirely by “a tax on Wall Street speculation,” whereby trades would be taxed at a rate of 0.5% for stocks, 0.1% for bonds, and 0.005% for derivatives.  They also claim the legislation would raise up to $220 billion in the first year and more than $2.4 trillion over 10 years.

The proponents further say that“Because the increased trading on Wall Street over the past several decades has not benefited working Americans, the reduced trading that results from a financial transaction tax would not harm the savings of the middle-class who invest through pensions or mutual funds.”

In conclusion, if the College for All Act were to pass, solo 401k account holders may switch from traditional solo 401k plans to self-directed solo 401k plans for investing in alternative investments such as real estate, notes, tax liens, and metals, to name a few, since the “Wall Street” tax” would not apply these types of investments.

Women May Want to Consider Opening a Solo 401k Plan to Improve Saving for Retirement

A survey published by T. Rowe Price found that women are saving significantly less than men for retirement, so a solo 401k plan may be a good way to bridge this savings gap.

Here are some findings from the survey:

  • Baby boomer women have a median 401(k) savings balance of $59,000, while baby boomer men have median 401(k) savings balance of $138,000.
  • Millennial women have a median 401(k) balance that is $30,000 less than the median balance of millennial men.
  • As for  median income, women earn about $27,000 less than men, so this may be a contributor factor. Women are deferring less of their income to their 401(k)s when compared to men.
  • Women also don’t use other retirement accounts as much as man, with 10% saying they use other vehicles compared to the 32% of men.
  • Retirement Expectations. Women are more likely to believe they will have to reduce their standard of living in retirement (46%) compared to men (37%). Further, nearly half of men believe they will live as well or better in retirement compared to when they were working, compared to one-third of women who expressed that sentiment.
  • Life in Retirement. Significantly more women are single or widowed once in retirement compared to men: Within the first five to 10 years of retirement, 33% of women respondents were either widowed or divorced compared to 17% of men, and after 11 years, the number of single or divorced women increased to 45%, while the number of men barely changed at 18%.
  • Financial Advice. Both men and women cited ease of use as their most favored attribute for financial advice. However, women place more importance on advice that fits into their work or personal schedule, as opposed to men who place more importance on advice that alerts them to critical developments in their accounts.

In sum, both men and women can use a solo 401k to help save for retirement, and many do. We have found that about 20% or our solo 4o1k clients not only contribute to their solo 401k pan but also their full-time job 401k plan as well as IRAs.  In order to qualify  for a solo 401k plan, you have to be self-employed with no full-time W-2 employees. Also, contributions to the solo 401k plan are based on net earned income from the self-employed business not from your day-time job W-2 income.

Trend in Terminated Employees Keeping 401k Funds Invested

According to a 2019 study (The “2019 Universe Benchmarks” report) by Alight Solutions, a large number of participants are not liquidating their accounts and others are choosing to transfer them to IRAs or other qualified plans.

Following is some information found in the report.

  • 32% of separated participants during the first nine months of 2018 kept their balances in the plan as of year-end.
  • Of fund that left the plan,  77% of the money was transferred to IRAs.
  • Older workers tended to to transfer the funds to an IRA.
  • Whereas, 39% younger workers preferred to transfer their funds to IRAs, and 27% transferred their balances to another plan (the solo 41k fall s under this plan category).
  • Older workers, however, much preferred an IRA rollover. 89% selected rolling over balances into an IRA, while  3% rolled over to a different plan.


Retirement Assets Up First Quarter of 2019

According to a report published on June 19, 2019 by the Investment Company Institute (ICI), total US retirement assets were $29.1 trillion as of March 31, 2019, up 7.4 percent from December 2018. Retirement assets accounted for 33 percent of all household financial assets in the United States at the end of March 2019.

Sources: Investment Company Institute, Federal Reserve Board, Department of Labor, National Association of Government Defined Contribution Administrators, American Council of Life Insurers, and Internal Revenue Service Statistics of Income Division



Assets in individual retirement accounts (IRAs) totaled $9.4 trillion at the end of the first quarter of 2019, an increase of 8.3 percent from year-end 2018.

IRAs held $9.4 trillion in assets at the end of the first quarter of 2019. Forty-six percent of IRA assets, or $4.4 trillion, was invested in mutual funds. With $2.4 trillion, equity funds were the most common type of funds held in IRAs, followed by $929 billion in hybrid funds.

Defined Contribution Plans Including Solo 401k plans

Defined contribution (DC) plan assets were $8.2 trillion at the end of the first quarter of 2019, up 8.2 percent from year-end 2018.

Americans held $8.2 trillion in all employer-sponsored DC retirement plans on March 31, 2019, of which $5.7 trillion was held in 401(k) plans

Mutual funds managed $3.7 trillion, or 65 percent, of assets held in 401(k) plans at the end of March 2019. With $2.2 trillion, equity funds were the most common type of funds held in 401(k) plans, followed by $1.0 trillion in hybrid funds, which include target date funds.


Solo 401k & ROBS 401k Employee Plans Compliance Unit (EPCU)

From a ROBS 401k and a Solo 401k plan perspective, you might receive examination or compliance check letters.The EPCU develops compliance projects and performs data analysis to focus on areas of potential non-compliance.

    • Taxpayers are initially contacted by correspondence, but the EPCU may follow up with additional letters and/or telephone calls.
    • Most issues are resolved without an on-site examination of the books and records of the plan, saving time and money for both the taxpayer and the IRS.
    • To date, the EPCU has completed 70 projects and conducted over 41,000 compliance checks.

Hear the EPCU webinar and watch their video on updates in the unit and recent projects results.

Continuous Projects

Current Projects5310-A Filing Project, Phase II
Asset Mismatch Project
Data Analysis Verification Project
Favorable Letter/Non-Filer Project
Final Return with Assets Project
Form 5310-A
Form 5500-EZ First Return Filer Project
Form 5500-EZ Non-Filer Project
Form 5500-EZ Excess Participant Loans Project

Multiemployer Certification Compliance Project
Multiemployer Validation
What We’ve Learned So Far – Project Findings

Nonbank Trustees and Custodians
Non-Governmental 457(b) Excess Deferrals Project
A Second Look: Partial Termination Project (New)
What We Learned in the First Project
SIMPLE IRA Plans – Eligible Sponsors Project (New)
Single Account 401(k) Project (New)
Sole Proprietor Participation Project


Approved Projects
These projects have been approved for further development by the Project Approval Committee. The projects are then prioritized with other approved projects and may be started based on a variety of factors, including staffing resources, time commitments, and potential project workload volume.


Examination vs. Compliance Check
EPCU explains the difference

EPCU Overview
Video explaining the EPCU

EPCU Articles
An archive of articles related to the work in EPCU


Sample Letters
Letters you may receive during the course of the compliance contacts


Questions and answers about EPCU and the projects


A Plan Sponsor’s Responsibilities
Tips for running your plan properly


Employee Plans Customer Account Services
For general questions about retirement plans or to inquire about your compliance check. If your question is about a current project, please include the project name in the subject line of your e-mail.

Page Last Reviewed or Updated: 18-Jun-2019

ROBS 401k Audit Causes DOL & IRS

Here are some of the most common items that lead to a Department of Labor (DOL) and IRS audit of employer plans including ROBS 401k plans (Business Financing 401k plans):

Complaints by employees. They may submit a complaint to the government over disputes regrading items such as distributions, contributions  and participant loans.

Form 5500. This form is used for multiple purposes by the government including as an audit tool in addition to census use. The government will review the current one and compare it to the ones filed in previous years to see if big changes occurred. For example, if last year’s ending balance does not match this year’s beginning balance or if the number of assets in the plan is incorrect.

Preparing for a Possible Inquiry by the Government

Common sense applies here. For example, when processing distributions, confirm that participant qualifies for the distribution and that proper documentation is reporting is performed. Form a plan document side, make sure plan amendments documents are timely and properly executed. The auditor will also requests for documents related to plan governance, fiduciary obligations and plan administration.


ROBS 401K: Real Estate Operating Company Requirements

While the ROBS 401k is often used to fund businesses such as routes (e.g., FedEx) restaurants, car care centers, senior and child care centers and other businesses that offer goods or services,  the ROBS 401k  can also be used to fund real estate ventures as long as the real estate operating company requirements are satisfied.

Real Estate Operating Company Requirements: If you want to use your funds for real estate, the following rules apply:

    • 1) The corporation that you invest your retirement funds in may invest in real estate that satisfies the following requirements:
    • a. At least 50 percent of the assets of the business, valued at cost, must be invested in real estate which is managed or developed and with respect to which such entity has the right to substantially participate directly in the management or development activities.
    • b. Such an entity in the ordinary course of its business must be engaged directly in real estate management or development activities.
    • 2) Expenses related to the real estate will be paid by the corporation.
      3) The real estate will not be used for personal use.
      4)There may be periods of time when the 50% test described in 1(a) above is not satisfied.  This confirms that it would be acceptable as long as the 50% test is satisfied on the following dates: (i) the “initial valuation date” or the first date on which the corporation makes an investment that is not a short-term investment of funds pending long-term commitment; and (ii) at least one day during each annual valuation period.  An “annual valuation period” is an annually recurring period of not more than 90 days that begins no later than the anniversary of an entity’s initial valuation date. For example, if the corporation’s first long-term investment is made on October 3, 2017, that date is its initial valuation date. The first annual valuation period can commence as late as October 3, 2018. An annual valuation period that commences on October 3, 2018, would end on December 31, 2018, and recur each October 3 through December 31 thereafter. Once an annual valuation period is established it may not be changed except for good cause.


2019 Solo 401k Contributions Plus Voluntary After-Tax

General Information regarding Solo 401k Contributions:

Solo 401k contributions are based net- income from self-employment (i.e. you can’t contribute more than you make).

You can make the contributions from your business or personal checking account as long as the funds stem from self-employment income.

The total contribution limit for tax year 2019 is $56,000 plus an additional $6,000 catch up if age 50 or older. For 2018, the total contribution limit was $55,000 or $61,000 if age 50 or older.
To make the contribution, you will make the check payable in the name of the solo 401k and write “Annual Contribution” on the memo section of the check.

You can use our on-line solo 401k contribution calculator to calculate the contribution amount.

Here is the link and it works best on Internet Explorer browser.

You may also use the online annual contribution form located on our website to internally document the contribution. This form is for your records only.


Here is additional information regarding the solo 401k contribution rules.

Solo 401k Contributions

The business owner acts in both capacities in a solo 401k plan: employee and employer.  As such, the business owner can make both contribution types: employee and employer. (Note: Matching contributions do not apply to a Solo 401kplan).


Type 1 Contribution (Employee): Employee contributions also known as elective deferrals up to 100% of net earnings from self-employment income up to the annual contribution limit; Note: See information below regarding how to determine your self-employment income for contribution purposes since it depends on how your self-employed business is organized (e.g. sole proprietor, S-Corp, etc.).


2019: $19,000 plus an additional $6,000 catch-up contribution if you are 50 or older; and


Note: If the Solo 401k participant is participating in another qualified plan such as a 401k plan offered through a w-2 “day job,” any employee contributions made by the individual to such plan will be aggregated with any employee contributions made to the Solo 401k plan in determining whether the limit has been met.


Type 2 Contribution (Employer): Employer profit sharing contributions up to:

  • If taxed as an unincorporated business (e.g., sole proprietor or partnership) then 20% of net business income (i.e. from Line 31 on Schedule C or Line 14 of K-1 as applicable) after deducting one-half of self-employment tax; or
  • If taxed as a corporation, then 25% of w-2 income.


Note: For a solo 401k with multiple participants (e.g. husband and wife), the employee & employer contribution limits are calculated for each participant individually (i.e., based on each person’s self-employment income).


Total Contributions: Total contributions to a solo 401k plan cannot exceed $56,000 for 2019, plus an additional catch-up amount of $6,000 if age 50 or older.  Please note that if you intend to also make Roth and/or after-tax contributions, please contact us for more information on making such contributions.  See more regarding making voluntary after-tax contributions below.


IMPORTANT:  The annual solo 401k contribution limits depends on the type of entity sponsoring the solo 401k plan.

  • If the entity type is a Sole Proprietor, it is equal to line 31 of Schedule C(after deducting one-half of self-employment tax).
  • If the entity type is a C-Corporation, it is equal to W-2income from your self-employed business (“Box 1 plus any pre-tax elective deferrals NOT in Box 1).
  • If the entity type is an SCorporation, it is equal to W-2income from your self-employed business (“Box 1 plus any pre-tax elective deferrals NOT in Box 1).
  • If the entity type is a Partnership, it is equal K-1 (Form 1065) line 14 from your self-employed business (after deducting one-half of self-employment tax).


Note: To determine the amount equal to one-half of the self-employment tax, please take the following steps:


  • Navigate to our online calculator:
  • For Business Type: select “Unincorporated Sole Proprietorship”
  • Enter your net income as applicable (e.g. for a Sole Proprietor enter net income from line 31; for a Partnership enter Line 14 from your K-1).
  • Enter your age
  • Click “View Report”
  • In the sentence beginning “*Calculated as net business income…” the amount equal to one-half of the self-employment tax will appear in the phrase “Self-Employment Tax of ___”


Solo 401k Contribution Deadlines:


The self-directed 401k contribution deadlines are based on the type of entity sponsoring the solo 401k.

  • If the entity type is a Sole Proprietorship, the annual solo401k contribution deadline is April 15, or October 15 if tax return extension is timely filed.
  • If the entity type is an LLC taxed as an S-Corporation (calendar year), the annual solo401k contributiondeadline is March 15, or September 15 if tax return extension is timely filed.
  • If the entity type is an LLC taxed as a Partnership (calendar year), the annual solo401k contribution deadline is March 15, or September 15 if tax return extension is timely filed.
  • If the entity type is a Partnership (calendar year), the annual solo401k contribution deadline is March 15, or September 15 if tax return extension is timely filed.
  • If the entity type is an S-Corporation (calendar year), the annual solo401k contribution deadline is March 15, or September 15 if tax return extension is timely filed.
  • If the entity type is an C-Corporation (calendar year), the annual solo401k contribution deadline is April 15, or September 15 if tax return extension is timely filed.

Making Voluntary After-Tax Contributions

What is the maximum amount of voluntary after-tax contributions that I can make?

You can contribute up to the lesser of (i) 100% of your self-employment compensation (i.e. see below information regarding how to determine your self-employment compensation) or (ii) the overall limit ($55,000 for 2018 contributions, $56,000 for 2019 contributions) reduced by any pre-tax or Roth employee contributions/salary deferrals and any pre-tax employer/profit sharing contributions.

The amount of self-employment compensation depends on the type of entity sponsoring the solo 401k plan [SEE ABOVE].


When is the deadline to make voluntary after-tax contributions?


The self-directed 401k contribution deadlines are based on the type of entity sponsoring the solo 401k. [SEE ABOVE].


How do I make the voluntary after-tax contributions?

  • To make the contribution, you will make the check payable in the name of the solo401k and write “Annual Contribution” on the memo section of the check.
  • Deposit the amount of the voluntary after-tax contributions that you elect to make in the separate voluntary after-tax sub-account.
  • You will then transfer the funds to the Roth sub-account for the Solo401k.  Please let us know right away when you do so that we can send you the applicable forms to capture the information that we need to handle the required 1099-r (which we will do as part of our services for no additional charge).


Where do I report the voluntary after-tax contributions?

  • For self-employment income reported on a w-2, you may (but are not required to) report voluntary after-tax contributions in Box 14 of the w-2.
  • For all others, there is no place to report voluntary after-tax contributions.

Where do I report the conversion of funds form the voluntary after-tax sub-account to the Roth sub-account?

  • On Form 1040, report the amount converted in Line 4a and “0” in Line 4b unless there is a taxable gain.  Enter the word “Rollover” next to line 4b.
  • A taxable gain would result if the funds in the after-tax account accrued a gain after being contributed to such account in which case the amount of such gain is a taxable and needs to be listed on Line 16b.

Full Comparison of Retirement Accounts (Solo 401k, SEP IRA and SIMPLE IRA) for the Self-Employed

Retirement accounts such as the solo 401k plan, SEP IRA and SIMPLE IRA are popular choices for the self-employed because they are inexpensive to establish, maintain and minimum IRS reporting applies.

While businesses structured as  sole proprietorships, partnerships and corporations can qualify to open all three types of retirement accounts (i.e., solo 401k, SEP and SIMPLE), a solo 401k plan cannot be opened by state and local governments or any political subdivisions, tax-exempt organizations or business with full-time employees.

Te following charts compare all three self-employed retirement plan types  more closely.


While all three plans can be utilized by the self-employed, the solo 401k plan is more restrictive from an eligibility perspective because it can only be established by owner-only businesses. See the following chart for more on the eligibility requirements for each type of plan.

Plan Opening and Contribution Deadline

The establishment deadline for each plan type is different and contribution types and deadlines also vary. See the following chart for more.


Unlike the SEP IRA  and SIMPLE IRA where distributions can be made at anytime, distribution triggering events apply to solo 401k plans. Also, the mandatory 20% federal tax withholding rule applies to solo 401k plans but not to SEP IRAs and SIMPLE IRAs. See the following chart for more.


Court Rules in Agreement with DOMA Under a California Law Case Regarding a Retirement Account

On May 16, 2019 the Ninth Circut ruled in favor of the domestic partner in a case where the administrator of a retirement plan denied payment of retirement benefits to  the surviving domestic partner.

Under California law, registered domestic partners are given the same rights as spouses, and the same protections and benefits.

The plaintiff filed a claim with the plan administrator for spousal benefits, and the claim was denied based on the plan administrator’s interpretation of the term “spouse” in the plan, in a manner that excluded domestic partners.

The Ninth Circuit found that neither ERISA nor the Internal Revenue Code contained a binding interpretation of “spouse” after the Supreme Court found the Defense of Marriage Act (“DOMA”) to be unconstitutional.

The Court found that because California law gave registered domestic partners the same rights as spouses and that was not inconsistent with ERISA or the Internal Revenue Code (again ignoring DOMA), the plan administrator should have interpreted the term “spouse” to include registered domestic partners.

Recognition of marriages of same-sex couples for tax purposes

Following the Windsor decision, the IRS issued Revenue Ruling 2013-17, which holds that married same-sex couples are now treated as married for all federal tax purposes where marriage is a factor, if the couple is lawfully married under the laws of one of the 50 states, the District of Columbia, a U.S. territory or a foreign jurisdiction. Notice 2014-19 gives additional guidance on how qualified retirement plans should treat the marriages of same-sex couples.

DOL Issue Final Regulations

In September 2016 the DOL issued final regulations basically saying the terms are gender-neutral:

“spouse,” “husband,” and “wife” mean an individual lawfully married to another individual, and the combined term husband-and-wife means two individuals lawfully married to one another.

Closing Comments

When processing solo 401k plan beneficiary claims, make sure to review the signed beneficiary election form to determine if the spouse (regardless of gender) is the named beneficiary before processing the solo 401k plan death claim, as the beneficiary distribution rules are more favorable to spouse beneficiaries than non-spouse beneficiaries.

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