With the passage of the SECURE 2.0 Act, the Roth solo 401k provisions were expanded.
Background
Beginning in 2006, self-directed solo 401k plans have allowed for Roth designated contributions (aka Roth solo 401k contributions).
With a designated Roth Solo 401k account, you can:
- make designated Roth contributions to the solo 401k plan; and
- transfer/roll over amounts in your former employer plan accounts to the Roth solo 41k as long as you no longer work for the employer that offers the plan or are 59 1/2 or older.
How SECURE 2.0 Act Extended Roth Solo 401k Provisions
Permits Roth Solo 401k Employer Contributions
Prior to 2023, employer (profit sharing) solo 401k contributions could only be applied on a pretax basis and just employee contributions including the catch up amount for those age 50 or older could also be treated as Roth solo 401k contributions.
However, under the SECURE 2.0 Act you now have the choice to make employer contributions to the solo 401k on a Roth basis.
Did away with Required Minimum Distributions from Roth Solo 401k funds
Prior to the SECURE 2.0 Act Section 603 Age 50+ Roth Catch-Up provision, Roth 401k plans including Roth solo 401k plans were subject to required minimum distributions (RMDs).
Not anymore starting in 2024!
However, on August 25, 2023, the Internal Revenue Service (IRS) released Notice 2023-62, which established a two-year administrative transition period for the SECURE 2.0 Roth Age 50+ Catch-Up requirements.
Just like Roth IRAs, Roth solo 401k plans will now be on a level playing field in that Roth solo 401k funds won’t be subject to RMDs anymore. This is welcome relief for those solo 401k participants who would process a Roth solo 401k to Roth IRA transfer to circumvent the RMD from the Roth solo 401k since Roth IRAs have never been subject to RMDs since their inception in 1998.
Note 1: Those who would have been required to process RMDs from their Roth solo 401k in 2024 or later years qualify for this new rule and so do those who have already been taking RMDs from their Roth solo 401k starting in 2024. This means that if you were already required to make RMDs in 2023 or prior years, you can stop taking RMDs from your Roth solo 401k in 2024 and future years as well.
Note 2: The new Roth solo 401k waiver rule under SECURE 2.0 Act does not change the required distributions from inherited Roth solo 401k funds. Therefore, just like inherited Roth IRAs, inherited Roth solo 401k funds are still subject to required distributions..
Requires Catch Up Contributions made as Roth solo 401k contributions if you generate a large amount of earned income from self-employment
If your earned income from self-employment income exceeds $145,000 and this figure is indexed for inflation in future years, starting on January 1, 2026 SECURE 2.0 Act requires catch-up contributions (aka the age 50 or older catch-up contribution) for solo 401k participants to be made on a Roth basis, so to the Roth solo 401k. This new requirement was supposed to be originally effective January 1, 20224 but the IRS delayed the start date to January 1, 2026 when IRS Notice 2023-62 was published by the IRS on August 25, 2023.
For example, if you are 50 or older in 2026 and want to make catchup contribution for 2026, you won’t be able to treat the catch-up solo 401k contribution as an employee pre tax contribution if your self-employment income was in an excess of $145,000 (as adjusted for inflation) in 2025 but instead will need to treat it as Roth solo 401k contribution.
