My Solo 401k Financial daily webinar series — Solo 401(k) Plan Document Is Not a Commodity. Duration: 18:14

Key Takeaways

• The Solo 401(k) plan document — not the brokerage — determines whether a plan allows the Mega Backdoor Roth, participant loans, in-plan Roth conversions, and alternative investments.
• Fidelity and Schwab’s own Solo 401(k) plan documents do not permit Mega Backdoor Roth contributions or participant loans; these features require a separate, advanced plan document.
• A Solo 401(k) participant loan allows borrowing up to 50% of the account balance, not to exceed $50,000, with repayment at prime-plus-one-percent interest over up to five years — or up to thirty years for a primary residence purchase.
• The 2026 Solo 401(k) voluntary after-tax contribution limit is $72,000 (before catch-up); a solopreneur whose W-2 wages from a C-Corp meet or will meet that threshold can contribute the full amount and immediately convert it to a Roth Solo 401(k) — the Mega Backdoor Roth strategy.
• Once a Solo 401(k) plan balance exceeds $250,000 (including any defined-benefit plan), an annual Form 5500-EZ must be filed; the IRS penalty for late filing is $250 per day, and discount brokerages do not prepare this form.
• Eligible solopreneurs can claim up to $1,500 in Solo 401(k) tax credits, which more than offsets My Solo 401k Financial’s fees ($650 initial cost; $125 annual fee thereafter) for the first seven years.
• My Solo 401k Financial does not hold or have access to client account funds, making the firm fully compatible with advisors and clients who want custody at Fidelity, Schwab, E-Trade, or hundreds of other institutions.

What Does the Solo 401(k) Plan Document Actually Control?

The Solo 401(k) plan document is the legal rulebook for the plan. When a solopreneur opens a Solo 401(k) directly at a discount brokerage, that brokerage’s plan document governs what the plan can and cannot do — and those documents are written to keep operations simple for the brokerage, not to maximize features for the participant.

Specifically, the Solo 401(k) plan document controls:

• Contribution types — whether voluntary after-tax contributions (the first step of the Mega Backdoor Roth) are permitted
• In-plan Roth conversions — whether pre-tax or after-tax dollars can be converted to a Roth account inside the plan
• Participant loans — whether the participant can borrow from the plan at all
• Investment range — whether the plan is limited to publicly traded securities or can hold alternative assets such as real estate, cryptocurrency, precious metals, and private equity
• Withdrawal rules — the conditions under which distributions are permitted

Two Solo 401(k) plans held at the same brokerage can have completely different capabilities if they were established under different plan documents. A plan opened with My Solo 401k Financial’s documents at Fidelity or Schwab has access to features that the brokerage’s own Solo 401(k) plan documents do not permit.

Feature Comparison: Discount Brokerage Plan vs. Advanced Plan Document

The table above compares which features are available based on the plan document provider, not the brokerage where accounts are held. A plan using My Solo 401k Financial documents can be held at Fidelity, Schwab, or any other institution that will open accounts for third-party solo 401k plans.

How the Full Roth Toolkit Works in a Solo 401(k) Plan

The Solo 401(k) plan document determines whether the plan offers the complete Roth menu. SECURE 2.0 compelled discount brokerages to permit at least Roth elective deferrals (since catch-up contributions must be made as Roth contributions for certain High W-2 Wage earners) but they still do not offer Mega Backdoor Roth contributions or in-plan Roth conversions.

Mega Backdoor Roth: The Two-Step Process

The Mega Backdoor Roth strategy uses voluntary after-tax contributions — a contribution type that Fidelity’s and Schwab’s own plan documents do not allow. The process has two steps:

1. Voluntary after-tax contribution — the solopreneur contributes after-tax dollars to the voluntary after-tax account inside the Solo 401(k). For 2026, a solopreneur whose W-2 wages from a C-Corp equal or will equal $72,000 can contribute up to $72,000 as a voluntary after-tax contribution (assuming no other contributions to the plan or to a 403(b)).
2. In-plan conversion — those after-tax dollars are immediately transferred to the Roth Solo 401(k) account (or to a Roth IRA). This second step is a conversion and triggers a reporting requirement on Form 1099-R.

Learn more about the Mega Backdoor Roth using a Solo 401(k) plan on the My Solo 401k Financial website.

2026 Catch-Up Contributions and the $150,000 Roth Threshold

For 2026, participants age 50 and older can make an additional $8,000 catch-up contribution above the $72,000 annual addition limit. Participants age 60, 61, 62, or 63 at the end of 2026 may be eligible for a higher “super catch-up” contribution of $11,250 (instead of $8,000) under SECURE 2.0. Under SECURE 2.0, catch-up contributions must be made as Roth contributions for participants whose prior-year wages exceeded $150,000 (which will increase over time) — but participants whose W-2 wages are $150,000 or less may make catch-up contributions as pre-tax contributions.

Solo 401(k) Participant Loans: How the $50,000 Loan Feature Works

The Solo 401(k) plan document must expressly permit participant loans for a plan to offer them. Fidelity’s and Schwab’s own plan documents do not allow this feature. A plan established under My Solo 401k Financial’s documents can allow the participant to borrow from their own retirement account and repay themselves with interest.

Key loan rules under a properly documented Solo 401(k):

• Maximum loan amount: 50% of vested account balance, not to exceed $50,000
• Permissible uses: Any purpose (general purpose loan)
• General purpose repayment term: Five years, with equal monthly or quarterly payments of principal and interest
• Primary residence purchase: Term can be extended to match the underlying mortgage term — potentially up to 30 years
• Interest rate: Prime rate plus 1% or CD rate plus 2%
• Documentation: Required loan documents must be prepared; My Solo 401k Financial prepares these at no additional charge within one business day of receiving the applicable form submission

Investment Freedom: What a Truly Advanced Solo 401(k) Plan Document Unlocks

A discount brokerage Solo 401(k) plan document limits investments to whatever that brokerage offers — typically publicly traded stocks, ETFs, and mutual funds. An advanced Solo 401(k) plan document removes that restriction and gives the participant checkbook control — the ability to write checks or initiate wire transfers directly from the plan’s bank account to fund any IRS-permissible investment.

Asset classes available under an advanced Solo 401(k) plan document include:

• Publicly traded stocks, ETFs, and mutual funds (same as at any brokerage)
• Real estate (rental property, raw land, notes)
• Precious metals (IRS-approved gold, silver, platinum, palladium)
• Cryptocurrency
• Private equity and pre-IPO stock
• Other alternative investments permitted by ERISA and IRS rules

Keep Your Brokerage and Your Advisor: How the Model Works

The key distinction between My Solo 401k Financial and other Solo 401(k) providers is custody. My Solo 401k Financial is a plan document provider and compliance support firm, not a custodian. The firm never holds, accesses, or manages client account assets.

The workflow for a solopreneur or advisor who wants advanced Solo 401(k) features while keeping existing custodial relationships:

1. Obtain the Solo 401(k) plan documents from My Solo 401k Financial (online application; documents prepared same business day after payment).
2. Open the Solo 401(k) trust account(s) at the bank, brokerage, or credit union of choice — Fidelity, Schwab, E-Trade, or any of hundreds of banks and credit unions nationally.
3. Nickname each account (pre-tax, Roth, voluntary after-tax) inside the brokerage’s online interface to keep them organized. The brokerage provides the accounts; My Solo 401k Financial provides the plan and compliance support.
4. Submit forms at mysolo401k.net/forms whenever a reportable transaction occurs (Mega Backdoor Roth conversion, loan request, distribution).

For advisors, this model means the advisor’s assets under management remain under the advisor’s custody at their preferred custodian, while the advisor’s solopreneur clients gain access to features the brokerage’s own plan documents would not allow.

Explore the full range of Solo 401(k) plan features and setup options at My Solo 401k Financial.

Advanced Compliance Support: Form 5500-EZ, Form 1099-R, and the $1,500 Tax Credit

Form 5500-EZ: The $250-Per-Day Penalty Most Solopreneurs Don’t Know About

When the total value of a Solo 401(k) plan — including any defined benefit plan the solopreneur maintains — exceeds $250,000, the IRS requires an annual informational return on Form 5500-EZ. The late-filing penalty is $250 per day with no statutory maximum. Discount brokerages do not prepare this form. My Solo 401k Financial prepares and electronically files the Form 5500-EZ at no additional charge when clients notify the firm in time to capture the required financial data.

Form 1099-R for Roth Conversions

The second step of the Mega Backdoor Roth — converting voluntary after-tax contributions to Roth — is a taxable conversion that must be reported on Form 1099-R. My Solo 401k Financial prepares the Form 1099-R at no additional charge when clients submit the after-tax-to-Roth transfer notification through the firm’s website.

The $1,500 Solo 401(k) Tax Credit

My Solo 401k Financial was the first Solo 401(k) provider to offer plan documents that enable eligible solopreneurs to claim $1,500 in Solo 401(k) tax credits — credits that exceed the firm’s fees for the first seven years. The firm’s fee structure is $650 at setup (a $525 establishment fee plus the first $125 annual fee), then $125 per year thereafter. The flat annual fee does not increase as plan value grows.

Attendee Questions from the Webinar

Mike’s Question: Do I Need to Do Anything at Fidelity Besides Renaming the Accounts?

Attendee Mike asked whether there is anything at Fidelity needed to differentiate the Solo 401(k) sub-accounts — pre-tax, Roth, and voluntary after-tax — beyond simply renaming them.

The answer: renaming (nicknaming) the accounts is essentially all that is needed. When a customer brings My Solo 401k Financial plan documents to Fidelity, Fidelity’s role is to provide the brokerage accounts — not to act as plan administrator, not to police the plan, and not to provide compliance support. The participant logs into Fidelity, uses the gear/settings option on each account, and assigns a nickname (e.g., “Solo 401k Pre-Tax,” “Solo 401k Roth,” “Solo 401k After-Tax”) to track each account type.

Manisha’s Question: C-Corp W-2 Wages, Mega Backdoor Roth Timing, and SEP IRA RMDs

Attendee Manisha asked: “My W-2 wages for my C-Corp by the end of June 2026 will exceed $72,000. Can I contribute $72,000 to my voluntary after-tax account in the first week of July and immediately move the money to the Roth Solo 401(k)? I have a SEP IRA in Fidelity. I’m currently taking RMDs from my SEP IRA. Do I have to roll my SEP IRA into my new Solo 401(k) pre-tax account?”

The answer to the first part: yes. A solopreneur can make 2026 Solo 401(k) contributions as long as the income to justify those contributions has been or will be earned by year-end. Making a $72,000 voluntary after-tax contribution in early July — when W-2 wages will reach $72,000 by June 30 — is permissible, provided no other contributions have been made to the Solo 401(k) or to a 403(b) that would reduce the available limit. The contribution can be made, then immediately converted to the Roth Solo 401(k).

The answer to the second part: no. A solopreneur taking required minimum distributions from a SEP IRA cannot roll the RMD amounts themselves into the Solo 401(k). However, the remaining non-RMD balance in the SEP IRA can be transferred (rolled over) to the pre-tax Solo 401(k) — but there is no requirement to do so. The solopreneur may leave the SEP IRA where it is.

The deadline to make all 2026 contributions — including catch-up contributions — is the business tax return deadline including any timely filed extension. For a sole proprietor or single-member LLC, that is April 15, 2027, or October 15, 2027 with extension.

Key Terms Defined

Solo 401(k) plan document

The legal instrument that establishes and governs a one-participant 401(k) plan. The plan document determines which contribution types, investment categories, loan features, and distribution rules are available to the plan participant. Two plans at the same brokerage can have entirely different capabilities depending on whose plan document was used.

Mega Backdoor Roth

A two-step strategy available under Solo 401(k) plans whose documents permit voluntary after-tax contributions. Step one: the participant contributes after-tax dollars up to the annual addition limit ($72,000 for 2026 before catch-up). Step two: those after-tax dollars are converted to the Roth Solo 401(k) or Roth IRA, triggering a 1099-R but generating no taxable income because the contribution was already after-tax.

Checkbook control

A feature of Solo 401(k) plans under which the participant trustee has direct signing authority over a bank account held in the name of the Solo 401(k) trust. This allows the participant to write checks or initiate wires to fund non-brokerage investments — such as real estate or private equity — without going through a custodian for each transaction.

Form 5500-EZ

The annual information return required by the IRS for one-participant 401(k) plans whose total assets — including any related defined benefit plan — exceed $250,000 at year-end. The late-filing penalty is $250 per day. Discount brokerages that serve as plan document providers do not prepare this form; My Solo 401k Financial does, at no additional charge (for those who timely request it and provide info needed in a timely fashion).

In-plan Roth conversion

A transaction inside a Solo 401(k) plan in which pre-tax or after-tax funds are converted to the Roth account within the same plan. This triggers income recognition (for pre-tax conversions) and a 1099-R reporting requirement. The conversion feature must be permitted by the plan document — it is not available in Fidelity’s or Schwab’s own Solo 401(k) plan documents.

Frequently Asked Questions