The cost of borrowing form your solo 401k plan just increased from 4.50% to 4.75%. In several communications, the IRS has consistently stated that a fair interest rate payment on a 401k participant loan is the prime rate plus one point. The new prime rate of 3.75% went into effect this week. It was previously at 3.50%.
The new prime rate of 3.75% only affects new 401k participant loans not prior loans because when you borrow from a solo 401k plan, the interest rate stays fixed during the life of the solo 401k participant loan. Therefore, any new solo 401k participant loans would be subject to the 4.75% (3.75 plus on point) interest payment. Of course, the full loan interest payment flows back to the solo 401k plan not the bank or brokerage firm. To learn more about he solo 401k participant loan rules, VISIT HERE.
