Transfer 401k loan and convertible note to a solo 401k

BACKGROUND: I am a participant in my employers 401K Plan. I currently have $100k in my plan including a convertible note from a non-publicly traded company ($30K), PENSCO TRUST is the custodian of that note. The other assets are held by a traditional brokerage in traditional mutual funds. I also borrowed from my 401K and owe about $15K presently.

I am going to leave my current employer by the end of the year and will be self-employed. I would like to set up a solo 401k for myself/new company and transfer (roll over) the assets to it (including the loan). I am an Enrolled Agent now (and past CPA from twenty years ago, e.g. I have some experience with tax matters).

Please give me your advise, recommendations and fees.

ANSWER: The convertible note can be transferred in-kind to the new solo 401k since it would be transferred from a 401k. You would need to coordinate the paperwork associated with the in-kind transfer of the convertible note with the president of the non-publicly traded company as well as the current 401k custodian (Pensco Trust) sot that the private company and Pensco properly assign the asset to the new solo 401k. Once you are ready to proceed with this step we can guide you through it. With respect to the outstanding 401k participant loan, it can be transferred to the new solo 401k provided your current employer will allow you to transfer it and the loan is not in default. Once the 401k loan is transferred to the new solo 401k, it would basically entail following the original 401k loan payment terms (i.e., continuing with the same loan payment amount and payment schedule) except that the loan payments would now flow into the new solo 401k plan bank account.

Dave in Nebraska

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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