If you are currently participating in a simplified employee pension (SEP) IRA and want to now participate in a Solo 401k (commonly referred by other names such as self-directed 401k or self-directed Solo 401k), a new plan document must be signed. You cannot update your SEP IRA document to a Solo 401k plan.
With respect to terminating the SEP IRA, you have two options, which are:
- Terminate the SEP IRA and rollover the assets to the Solo 401k plan.
- Rollover some of the funds to the new Solo 401k plan and keep the rest of the SEP assets in the IRA–however, any assets remaining in the IRA cannot be distributed without the 10% early distribution penalty until you reach 59 1/2 (unless you qualify for an exception under IRC Sec. 72(t))
Take a loan or borrow
Lastly, after rolling over your SEP IRA assets to a Solo 401k plan, they can be borrowed through a participant loan, resulting in tax and penalty-free access to your money. To learn more about borrowing from a Solo 401k plan visit the following link.https://www.mysolo401k.net/Solo401kLoan.html