Solo 401k Plan Establishment Process and Loan Questions

I have a Janitorial Cleaning company and operate it as the sole proprietor with no employees.  I do have a few questions, then I should be ready to discuss on the phone the solo 401k plan process.

QUESTION 1: What does vested amount mean and is there a time period before a rollover from pension account becomes vested?

ANSWER: Vesting does not apply to a solo 401k because it is for the self-employed. Therefore, the solo 401k contributions are immediately vested, meaning that you don’t have to participate in the solo 401k plan for a certain number of years before the contributions can be distributed, provided, of course, you meet one of the distribution triggering events, such as age 59 ½ and termination of self-employment. Lastly, our solo 401k plan document permits distributions before age 59 ½ or termination of self-employment from amounts rolled over from other retirement plans including pension plans, as well as IRAs; of course, taxes and early distribution penalties would apply.

QUESTION 2: Once I complete the application for setting up a solo 401k and send in with payment, how long does it take to get setup?

ANWER: The solo 401k setup process is handled electronically online through our solo 401k sign-up page. Once the online submission and payment is submitted, we will e-mail the solo 401k plan documents the next day. Subsequently, after your sign the solo 401k plan documents, you can go to your local bank an open the checking account for the solo 401k. We can also assist you in opening a brokerage account with checkbook feature at Fidelity, Schwab or TD Ameritrade, which may be a better option, so that you can continue to trade stocks and mutual funds in addition to gaining option to invest in alternative investments such as real estate, promissory notes, tax liens, as well as retaining option to borrow from the solo 401k, also known as a solo 401k loan.

QUESTION 3: Should I request an EIN from the IRS before sending my paperwork for the Solo 401k plan?

ANSWER: Yes the EIN for the solo 401k is required because it will be listed on the solo 401k trust document. The employer identification number for the solo 401k can be established in minutes via the IRS EIN website.

QUESTION 4: One of the reasons I want to switch to get a better return for my money and request a loan so we can pay off a Student loan and Credit Cards and have one bill, so once the rollover is complete, how long will it be before we can request a solo 401k loan?

ANSWER: As soon as the solo 401k is funded, you can process the solo 401k the next business day, as we will prepare the solo 401k loan documents the next day and e-mail them to you. Click here to learn about the solo 401k loan process.

Thank you,

Jerry in North Carolina

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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