Solo 401k FAQs

About Solo 401k

What is a Solo 401k?
Solo 401(k) is an efficient way for a small business owner like you to speed up your retirement savings.

With tax-deferred savings of up to $53,000 for 2016 ($59,000 if you are age 50 or older) and $54,000 for 2017 ($60,000 if you are age 50 or older), and the invaluable choice to pick your own investments our Solo 401(k) indispensable.

Solo 401(k) is for owner-only businesses or those with part-time employees only. This includes sole proprietorships, closely held family businesses and corporations.

How does a Solo 401k operate?

The Solo 401(k) retirement plan allows for salary deferrals found in 401(k) plans employer contributions found in profit-sharing plans. You can make annual contributions of both salary deferral and profit-sharing contributions, empowering you to save up to $53,000 in 2016 ($59,000 if you are more than 50 years old), tax-deferred. The Solo 401k annual contribution limit increased by $1,000 for tax year 2017 to $54,000.

What are my obligations as to establishment and continuing management of my Solo 401k?

With our assistance you are responsible for completing the account applications to set up your Solo 401(k).

You are also obligated for operating and funding your plan per the plan provisions approved by the IRS under the qualified plan document.

You are obligated for funding this Solo 401(k) plan with your contribution and investing those contributions through the investment vehicle of your choice. You can use any bank of your choosing to establish a checking account for your Solo 401(k), and we will assist you in establishing the checking account for your Solo 401(k).

You are also obligated for monitoring the balance in your Solo 401(k) account and notifying us when the balance reaches $250,000 at any year-end.

Reason being, you are required to complete an IRS Form 5500, which we can assist you with , once your balance reaches $250,000.

If you would like us to complete the form for you, no additional fees will apply. Remember, this form is only required if your Solo 401(k) balance reaches $250,000.

Are there any forms that I must file with the IRS?

No annual tax reporting is applicable until your assets reach $250,000. At that point, you must file a Form 5500. We can do this for you for free.

However, you must always file a Form 1099-R with the IRS should you take a distribution of your plan assets upon plan termination or during participating in the plan . We can process this for you for free.


Is there a deadline to establish a Solo 401k plan this year?

Our deadline to establish your Solo 401(k) plan is December 31st.

Is there a deadline to fund a Solo 401k plan?

For Sole Proprietors:
Employee and profit-sharing contributions must be funded by your tax-filing deadline

For Incorporated business:
Employee and profit-sharing contributions must be funded by your business tax-filing deadline, provided the plan was established by the end of the previous year.

Getting Started

How do I proceed with opening a Solo 401k?
Starting a Solo 401(k) is easy and we will guide you through the entire account establishment process including opening a checking account at the bank of your choice for your new Solo 401(k).

Step 1: You will need your EIN to complete the sign-up process. Instructions for acquiring an EIN are on the first page of the sign-up process and your EIN can be obtained online via the IRS website.
You can find out how to get your EIN by clicking here.

Step 2: Call us at 800-489-7571 or e-mail us at and detail that you would like to establish a Solo 401(k).

Once we receive notification that you would like to establish a Solo 401(k) plan, we will complete the forms and then e-mail them to you for your signature.

Step 3: Once we receive copy of your signed Solo 401(k) documents, we will proceed with assisting you in establishing the checking account for the Solo 401(k) so you can start making investments right away.

The title of the checking account should be [COMPANY NAME or your name (if sole proprietor)] Solo 401k Trust.

NOTE FOR FUNDING ROTH AFTER-TAX CONTRIBUTIONS: If you plan to make Roth after-tax contributions, you MUST open up an identical checking account and name it (Company Name) Roth Solo 401k Trust. Reason being, this is an IRS requirement, plus this will help in segregating pre-tax vs after-tax contributions.

How long until my account is established and ready to be funded?

We can usually set up your account the same day that you decide to sign up.

If I am a sole proprietor, can I use my Social Security number to establish the Solo 401(k)?

No, you will need to get an EIN (Employer Identification Number) from the IRS.

Click here for instructions on how to do this.

This process will not take you very long; you can obtain your EIN over on the IRS website. We can also assist you in obtaining the EIN from the IRS.


Can I roll over/transfer my current retirement plan into the Solo 401k account?

This depends on the type of plan or account from which you are intending to roll/transfer the funds.

If the funds are in a rollover or conduit IRA, a profit-sharing or 401(k) plan, they most likely can be rolled into the Solo 401(k) as long as you did not make any after-tax contributions to those plans.

If you have a SEP, SIMPLE, Money Purchase Plan or Contributory IRA, please e-mail us at or call us at 800-489-7571 to discuss what you can do.

IMPORTANT: if you have contributed to a SIMPLE plan this year, you can only establish a Solo 401(k) for the next calendar year, as regulations do not allow you to contribute to a SIMPLE and establish a 401(k) in the same year. Call us and we can shed more light on this.

How long do I have once my previous 401k is terminated to roll those funds into my new Solo 401k plan?

You have 60 days from the day you receive your rollover check to roll your funds over.

Do I have to liquidate my stocks or alternative investments in my IRA or previous 401(k) to roll them over to a Solo 401(k)?

No, your stocks and alternative investments (e.g., real estate, notes, etc.) can be transferred in-kind, which means that they will be transferred as is to your new plan.


Can I sign up for a Solo 401k if my business has employees?

You can sign up for a Solo 401(k) only if all of your employees are working part-time (that is,. fewer than 1,000 hours per year).

If you have full-time employees, you can contact us at or 800-489-7571.

Can my spouse or other family member who works for my company participate in a Solo 401k ?

If your spouse or family member performs services and is compensated from the business, this person can participate in the same Solo 401(k) plan. The maximum amount your spouse or family member can save also depends on his or her income, salary and age. Solo 401(k) only allows for two participants (either an owner and spouse/family member, but not three different people).

Can a business partner who is not related to me participate in a Solo 401k ?

Since Solo 401(k) is for owner-only businesses, partners are eligible to participate as well as family members if they are also partners in the same business. In other words, solo 401k plans are only for owner-only businesses with no full-time W-2 employees who are not owners of the business sponsoring the solo 401k plan.

What happens if my company hires one or several full-time employees?

Prior to hiring any full-time employees, we recommend that you get in touch with us by e-mail at or by phone800-489-7571 to find out how we can assist you with additional retirement plan services that will support your company’s growth.

Note that once you hire a full-time employee, you will no longer be eligible to maintain a Solo 401(k). It is very important that you get in touch with us at that time to discuss your options.


How much can I contribute to a Solo 401k?

You can contribute up to $53,000 in 2016 and $54,000 for tax year 2017 (including an additional catch-up contribution of $6,000 if you are age 50 or older). The maximum amount you can contribute depends on your income or profit in any given year.

Contact us at or 800-489-7571 and we can help you calculate the contribution amount.

If two people participate in a Solo 401k , do both have to make contributions?

No because a solo 401k is for owner-only employee not common-law employees.

Is there a required annual minimum contribution?

No, there is not. You are not required to contribute to the plan every year.

Does the catch-up contribution apply to me?

If you are age 50 or older, you can contribute an additional $6,000 (for 2016) into your Solo 401(k) plan.

For details of how much more you can stash away this year, please contact us at

Are there limits on total profit-sharing contributions if I have more than one qualified retirement account?

Yes, the combined total of profit-sharing contributions cannot exceed 25% of gross income from a corporation, or 20% of net earned income for sole proprietors/partners.

Do I need to make my Solo 401k contributions by December 31st?

No you do not need to deposit your Solo 401k contributions by year-end.  Per the IRS publication covering the rules for Solo 401k plans and other owner-only retirement plans (IRS Publication 560), both employee and employer contributions can be made by the due date of the tax return for your self-employed business including timely-filed extensions.  Specifically, the chart titled “Key Retirement Plan Rules” on page 3 the publciation states that both employee and employer contributions can be made up until the tax return is due (including extensions).


What can my Solo 401k invest in?

Solo 401k also referred to as Solo 401k Real Estate or, 401k Real Estate, allows you to invest in any security or alternative investment such as real estate, private investments, private loans and much more.

Roth 401k

What is a Roth 401k plan?

A Roth 401(k) allows for after-tax contributions just like a Roth IRA. However, a Roth 401(k) allows for sharply higher annual contribution amounts for the employee deferral election than a Roth IRA of up to $18,000 ($24,000 if age 50 or older) in the 2016 tax year versus just $5,500 ($6,500 if age 50 or older), for a Roth IRA.

Can I contribute both regular (pre-tax traditional contributions) and Roth contributions (after tax) in the same year?

Yes, you can make contributions to both; however, the combined amount contributed in any one year is limited to $18,000 for 2016 (plus an additional $6,000 in catch-up contributions if you age 50 or older).

Are there any limits as to how much I can contribute to my Roth 401k account?

Yes, the combined amount contributed to all Roth accounts and traditional, pre-tax accounts in any one year for any individual is limited to $18,000 for 2016 (plus an additional $6,000 in catch-up contributions if you are age 50 or older).

How do I communicate how much I want to contribute to my Roth 401k account?

When you establish the Roth Solo 401(k) , you will need to establish two separate accounts:
one will be designated for Roth, the other for normal 401(k) pre-tax contributions.
This is required for reporting purposes.

Also, since you have already been taxed on Roth contributions , it is imperative that you record these contributions. At year-end and upon distribution, you will want to disclose to the government what contributions have already been taxed.

Do I have any record keeping or reporting obligations?

You should track all deposits made into either your pre-tax, profit-sharing, or after-tax (Roth) accounts for reporting purposes on year-end tax filings and at the point of distribution. We can assist you with this.

Please note: Due to the pre-tax vs. after-tax component of the different source types, pre-tax and employer profit-sharing contributions should be deposited into the same bank account and tracked each year. The Roth 401(k) contributions should be held in a separate bank account and tracked separately.

However, if you roll over a distribution from a designated Roth account to a Roth IRA, you should keep track of the amount rolled over in accordance with the instructions to Form 8606, Nondeductible IRAs.

If you receive a distribution from your Solo 401(k) account, you may be responsible for filing a Form 1099-R to report the distribution to the government. When you request the distribution from your investment company, confirm whether they are going to file the 1099-R or not.

Can distributions from a Roth account be rolled over?

Yes, you can roll your Roth 401(k) account over, but only to Roth 401(k) account of another employer, or to your personal Roth IRA.

If you do not roll your Roth account over as described above, the previously-untaxed earnings will be treated as an early distribution from a qualified plan (and consequently subject to the taxes and penalties for any such early distribution) UNLESS you had this Roth account for more than five years.

Does a separate account have to be opened under my Solo 401k plan to deposit my Roth contributions?

Yes. At the time that you establish your Solo 401k checking account or when you are ready. The key is that you have to segregate the regular (pre-tax) contributions from the Roth (post-tax) contributions by establishing two checking accounts under the name of your Solo 401k. When you are ready just gives a call and we can assist you with this.

If you already have a Solo 401k plan with us, you will need to open up an additional checking account with your bank provider for your Roth contributions.

To find out how to set up a Roth account with us if you already have a Solo 401k account, please contact us.


Can I borrow from my Solo 401k?

Yes. Solo 401k allows for participant loans.

You can borrow up to 50% of the account balance from your Solo 401(k) just no more than $50,000 (minimum of $1,000).

For example, Earl has a vested account balance of $150,000. Fifty percent of his account is $75,000, however the maximum loan that can be taken from a plan is $50,000.

The interest and principal is paid to the Solo 401k and payment is required to be made at least quarterly. There is a five-year term for a general loan. The interest rate used is prime plus 1%.

It is recommended that when funding your approved loan, you ONLY take the proceeds from either the pre-tax or Roth (after-tax) account. This will make it easier to track the loan and repayment amounts more easily, especially when reporting account activity to the government.

IMPORTANT: you will be responsible for tracking all distributions and payments made back to the loan on either a Pre-tax or Roth (after-tax) basis. Please consult with your tax professional for more information.

How quickly can the participant loan be processed?

It takes about two business days to process the loan.


What if I want to terminate my account?

We require a 60-day written termination notice before your next annual billing. Absent of such notice, you will be subject to a $95 termination fee. If you wish to terminate your account, we will send you a termination e-mail.

If you are terminating without a 60-day notice and you have already been charged your annual fee, your card will be credited back the annual fee minus the $95 termination fee.

Note: It is very important that we are notified if you wish to terminate your government qualified plan. This will allow us to cancel your annual billing. Also, the government mandates that all distributions from a trust are reported on a Form 1099R and that a final Form 5500 is prepared.

SOLO 401(K)