Applicability of SEC’s Regulation Best Interest (Reg BI) to Self-Directed Solo 401k Plans

If broker dealers give investment and/or rollover advise to IRA or self-directed solo 401k account holders, it is treated as advice to a retail customer and is therefore subject to the SEC’s Regulation Best Interest (Reg BI) requirements.

The reason recommendations to solo 401k plan are covered by Reg BI is because a solo 401k plan is an owner-only plan. Recommendation types include how to invest the solo 401k funds and, more importantly, rollover recommendations (i.e., to rollover the solo 401k fund to an IRA).

Here is what the SEC says:

“Best Interest to expressly apply to account recommendations including, among others, recommendations to roll over or transfer assets in a workplace retirement plan account to an IRA, … and recommendations to take a plan distribution for the purpose of opening a securities account…”


2021 IRA Annual Contribution Limits Released Notice 2020-79

The 2021 annual IRA contribution limits were recently released by the IRS and are found in Notice 2020-79.

Here are the IRA contribution limits for 2021:

  • Traditional and Roth IRA contributions: $6,000 (unchanged)
  • Traditional and Roth IRA catch-up contributions: $1,000
  • The ability to do deduct the IRA contribution amount is based on your earned income. The deductibility phase-out for single taxpayers participating in employer plans such as solo 401k plans increased in 2020 to $66,000 to $76,000 (in 2019, it was $65,000 to $75,000)
  • If you are married and file a joint Form 1040 tax return and participate in an employer plan such as a solo 401k plan, the IRA deductibility phase-out increased to $105,000 to $125,000 (it was $104,000 to $124,000 in 2019)
  • IRA deductibility phase-out for married with spouse an active participant in employer plan such as a solo 401k plan increased to $198,000 to $208,000 (in 2019, it was $196,000 to $206,000)
  • Roth IRA income limitation for determining maximum contribution for married joint filers: phase-out range rises to $198,000 to $208,000 (was $196,000 to $206,000)
  • Roth IRA income limitation for determining maximum contribution for single filers and heads-of-households: phase-out range rises to $125,000 to $140,000 (was $124,000 to $139,000)

First Make the IRA Contribution to your Self-Directed IRA

Lastly, for those IRA account holders who have IRA LLCs (aka checkbook IRA),  don’t forget to first make the annual IRA contributions to your self-directed IRAs before investing them in your IRA LLCs.

ASCENSUS Individual k Review – How to Change to a Self-directed Solo 401k

Ascensus Individual K Review

ASCENSUS Individual k Review

Please check out our webinar as we discuss the top reasons why clients transfer or switch their solo 401k at ASCENSUS to a self-directed Solo 401k with us including

  • The reasons why clients switch
  • The fees and costs
  • The ongoing compliance support that we provide.

Upgrade Your ASCENSUS Solo 401k

  • Why Switch?
    • 100% FLAT FEE self-directed plan including Mega Backdoor Roth & Alternative Investments for no additional charge
    • Expert Compliance Support (5500-ez, 1099-R, expert compliance team, etc.) for no additional charge
  • How to Switch

ASCENSUS vs. Self-directed Solo 401k

Acensus Individual K Comparison

How to Change Plan Providers:
ASCENSUS to Self-directed Solo 401k


  • New Solo 401k Plan Documents (vs. ASCENSUS “Do it yourself/DIY” plan documents)
    • List the original plan effective date
    • Obtain 401K EIN
  • Close Existing Account and Open New Account(s)
    • Pre-Tax, Roth and Voluntary After-Tax
    • Spouses
  • ASCENSUS Restatement Forms:
    • Individual (K) Termination Kit/ Plan Conversation Form (3 pages)
    • Plan Termination Payout Request Form (4 pages)
  • Not Required: No Final 5500-EZ or 1099-r

Additional Considerations:

  • If assets exceed $250K:
    • Have you been filing Form 5500-EZ?
    • If not, need to file under the IRS Correction Program
  • Do you wish to keep investments (in-kind transfer)?
    • Confirm that new brokerage account provider offers those funds
  • Are there multiple participants (e.g. spouses)?
    • Segregate the funds and transfer into separate sub-accounts
  • Consider filing an extension to ensure plenty of time to make contributions

Self-directed Solo 401k –
Compliance Support

  • Form 5500-ez
    • If your solo 401k plan balance exceeded $250,000 as of December 31, a Form 5500-EZ is due to the IRS by July 31. 
  • 1099-R
    • Distributions, Rollover, In-Plan Conversions
  • Solo 401k IRS Required Plan Updates
    • IRS-required plan updates with the next required update occurring in 2020 or 2021 once the IRS approves the industry wide update
  • Contribution Calculation (including Mega Backdoor Roth)
  • Loan Document Preparation
  • Alternative Investments
  • Account Setup
    • Bank, Brokerage, Crypto exchange, etc.

The Next SECURE Act Introduced and Referenced as SECURE Act 2.0

While the odds of SECURE Act 2.0 passing in 2020 is slim, it is still worth noting for 2021 as it may pass once the presidential election is finalized. As the name implies, the purpose of the proposed addition to the Act is to build on the the already previously passed SECURE Act from December 20, 2019.

“COVID-19 has only exacerbated our nation’s existing retirement crisis, further compromising Americans’ long-term financial security,”  Neal said in a statement upon introducing the legislation. “With the Securing a Strong Retirement Act, Ranking Member Brady and I build on the landmark provisions in the SECURE Act and enable more workers to begin saving earlier—and saving more—for their futures.”

Here ae the items found in the proposed SECURE ACT 2.0

  • Require automatic enrollment of eligible employees in 401(k), 403(b) and SIMPLE IRA plans with certain exceptions and grandfathering provisions.
  • Modify the credit for small employer plan startup costs.
  • Increase the amount of, and eligibility for, the “saver’s credit” for taxpayers making IRA contributions or deferral contributions to employer-sponsored retirement plans.
  • Exempt up to $100,000 of accumulated retirement account balances from required minimum distribution (RMD) requirements.
  • Reduce the penalty for failure to satisfy RMD requirements from 50% to 25%; if an IRA RMD failure is timely corrected, the penalty would be further reduced to 10%.
  • Permit 403(b) plans to invest in collective investment trusts
  • Increase the RMD age to 75.
  • Provide for indexing of IRA catch-up contributions.
  • Provide a second, higher tier of catch-up deferral contributions for those age 60 and older, with indexing provision.
  • Allow certain student loan repayments to be paid with employer match funds.
  • Provide a new small employer tax credit for enhanced plan eligibility for military spouses.
  • Enhance options for correcting employee contributions.
  • Permit increasing payments in IRA and defined contribution plan life annuity benefits.
  • Expand the IRS retirement plan correction program to permit self-correction of certain inadvertent IRA errors.
  • Permit tax-free qualified charitable contributions to be made from employer-sponsored retirement plans (now permitted only from IRAs).

Solo 401k Webinar – Deep Dive Compare Self-directed Roth 401k VS. Roth IRA

Roth 401k vs Roth IRA

Please check out our webinar for an in-depth discussion of the differences between self-directed Roth 401k vs. Roth IRA.

Roth 401k vs Roth IRA

  • Technical Differences
  • Practical Considerations
  • How to get more info about your situation

Compare Roth IRA vs. Roth Solo 401k

Compare Roth IRA vs. Roth Solo 401k

Compare Roth IRA vs. Roth Solo 401k

Compare Roth IRA vs. Roth Solo 401k

Compare Roth IRA vs. Roth Solo 401k

Roth IRA vs. Roth 401k –
Practical Considerations

  • Am I self-employed? Do I have full-time employees in my business? Roth Solo 401k:
    • Must be self-employed with no full-time w-2 employees
    • Roth IRA:
    • No self-employment requirement
    • An owner of a business with full-time employees is eligible
  • Do I want to make high contributions?
    • Roth Solo 401k:
      • For 2020:
        • $19,500 or $26,000 (if age 50 or older)
        • Up to $57,000 or $63,500 if plan allows for Mega Backdoor Roth
    • Roth IRA:
      • For 2020:
        • $6,000
        • $7,000 (if age 50 or older)
  • Will I need money before I retire?
    • Roth Solo 401k:
      • Non-qualified Roth 401k Distribution – taxes on the gains
      • Solo 401k participant loan up to 50% of the balance not to exceed $50,000
    • Roth IRA:
      • Non-qualified Roth IRA Distribution – no taxes on the contributions
      • Loan is not allowed
  • Am I 72 years of age or older?
    • Roth Solo 401k:
      • Required Minimum Distribution
      • May rollover to Roth IRA
    • Roth IRA:
      • No Required Minimum Distribution
  • Do I want to invest in alternative investments?
    • Roth Solo 401k:
      • Self-directed Solo 401k provider
      • Direct Checkbook Control
      • UBIT/UDFI exception for income from debt-financed real estate investment
    • Roth IRA:
      • Specialty Trust Company/Provider
      • Checkbook Control via Roth IRA LLC
      • No UBIT/UDFI exception for income from debt-financed real estate investment