Once you hire full-time W-2 employees in your self-employed business, you will need to either transfer the solo 401k plan to an IRA, or convert/restate the solo 401k plan to a full-time employer 401k plan.
If you choose to restate the existing solo 401k plan to a full-time employer 401k plan, the following applies.
- Choose: Select a new full-time employer 401k plan provider.
- Provider: A common provider of full-time employer 401k plans is The Stadard.
- Communicate: You need to let the new full-time 401k provider know that you currently have a self-employed solo 401k plan that you want to “restate” to a full-time employer plan.
- No Reporting: Note that we won’t have to issue a Form 1099-R or a final Form 55000-ez since you are restating the plan to a full-time employer 401k plan. In other words, your business is not shutting down, rather it is growing so it now needs to offer a full-time employer 401k plan to the full-time W-2 employees since a solo 401k plan is for owner-only businesses with no full-time employees.
- Moving the Funds: To move the funds from the existing solo 401k plan, simply make the check payable in the name of the new 401k plan, write “restatement of solo 401k plan to full-time employer 401k” on the memo section of the check, and deposit the funds directly into the new 401k plan.
- 401k Loan: Lastly, if you have an outstanding solo 401k participant loan, the loan payments will continue pursuant to the original payment schedule but made into to the new full-time employer 401k plan.