Vanguard Exits Individual 401k Business and Sells to Ascensus-Impact and Options for Solo 401k Account Holders

Vanguard Individual 401k to Ascensus Transition Hub:

Resource Center for Existing Vanguard Solo 401k Account Holders

On April 16, 2024 Ascensus announced their agreement to acquire Vanguardā€™s Individual 401(k) plans business. As a result, owner-only businesses with Individual 401k plans (aka solo 401k plans) at Vanguard may want to consider restating their solo 401k plan to another solo 401k plan provider such as My Solo 401k Financial as they offer a fully self-directed solo 401k for one flat fee of $525 plus an an annual fee of $125.

  • Why Switch?
    • 100% FLAT FEE self-directed plan including Mega Backdoor Roth Alternative Investments for no additional charge
    • Expert Compliance Support (5500-ez, 1099-R, expert compliance team, etc.) for no additional charge
    • Auto Enrollment Tax Credit: Our self-directed solo 401k plan is now eligible for up to $1,500 in dollar-for-dollar tax credits. Visit here to learn more.

Key Dates for Existing Vanguard Solo 401k Account Holders

DateEvent
July 17, 2024, 4 pm ESTLast day to initiate transactions, including contributions, change investments, or take a distribution through Vanguard.
July 19, 2024Last day to access your Vanguard Solo 401(k) account.
Week of July 22, 2024Your Vanguard Solo 401(k) account transitions to Ascensus Solo 401k platform.
Source: Information shared by existing Vanguard Solo 401k account holders

Impact and Options for Vanguard Solo 401k Account Holders

We recently hosted a deep dive discussion of the impact and options for existing Vanguard Solo 401k Account holders. You can watch the entire discussion at the following link or scroll down to view the key highlights as well as comparisons of the Solo 401k offered by My Solo 401k Financial vs plans offered by Fidelity, Schwab and E*Trade.

Download Powerpoint Slides: Impact & Options for Vanguard Solo 401k Account Holders

Vanguard Solo 401k to Ascensus vs My Solo 401k

Vanguard Solo 401k: The Frugal Investor

  • If no action is taken, existing Vanguard Solo 401k accounts will be transitioned to Ascensus Individual 401k Plans and subject to the following fees:
    • $20 per participant
    • $20 per mutual fund
  • Including the tax credit, the net cost to set up and maintain a Solo 401k with My Solo 401k Financial is $0 over the first seven (7) years.
    • Fees paid with non-retirement funds to preserve retirement funds

Vanguard Solo 401k: The Roth Maximizer

  • If no action is taken, existing Vanguard Solo 401k accounts will be transition to Ascensus Individual 401k Plans which does not allow for:
    • NO Roth Employer Contributions
    • NO Mega Backdoor Roth Solo 401k Contributions
  • With a Solo 401k from My Solo 401k Financial, a Solo 401k owner can make both Employer contributions as Roth Solo 401k contributions as well as Voluntary After-Tax Solo 401k contributions (Mega Backdoor Roth Solo 401k):
    • Contribute up to $69,000 (or $76,500 if 50 or older) as Roth/Mega Backdoor Roth Solo 401k contributions

Vanguard Solo 401k: The Large Account Holder

  • If no action is taken, existing Vanguard Solo 401k accounts will be transition to Ascensus Individual 401k Plans which does not handle the Form 5500-EZ which is required once the value of the Solo 401k plan exceeds $250,000:
    • Form 5500-EZ required once the value exceeds $250k
    • Update 4/22/2024: As discussed in our My Community forum on the topic, Ascensus confirmed that they will not handle the Form 5500-EZ and will refer you to your CPA/Tax advisor.
  • My Solo 401k Financial handles Form 5500-EZ preparation for Solo 401k plans that need it as an optional free service (no additional charge):
    • File Form 5500-EZ filed under the electronic filing system (EFAST)

Vanguard Solo 401k: The Alternative Investor

  • If no action is taken, existing Vanguard Solo 401k accounts will be transition to Ascensus Individual 401k Plans which limits investments to certain Vanguard Mutual Funds:
    • No Non-Vanguard Mutual Funds, Stocks, Bonds, Certificates of Deposits
  • My Solo 401k Financial helps clients open accounts at the bank or brokerage of choice:
    • ā€œFreeā€ Brokerage Accounts at Fidelity, Schwab, etc. with free online traditing to invest in stocks, bonds mutual funds, etc.
    • Bank Accounts
    • Alternative Investments such as
      • Real Estate
      • Private Placement
      • Private Stock
      • Crypto
      • Precious Metals
      • Notes

Vanguard Solo 401k: The Rainy Day Investor

  • If no action is taken, existing Vanguard Solo 401k accounts will be transition to Ascensus Individual 401k Plans which donā€™t allow Solo 401k participant loans:
    • No 401k Loans allowed
  • With a Solo 401k from My Solo 401k Financial, a Solo 401k owner may take Solo 401k participant loan(s)
    • Borrow up to 50% of the balance not to exceed $50,000 (per participant)
    • Loan Document Preparation

Other Options for Vanguard Solo 401k Account Holders

Vanguard Solo 401k to Schwab vs My Solo 401k

FeatureSchwabMy Solo 401k
Account Opening ProcessComplete Adoption Agreement and other paperwork1 Min App to Open Solo 401k
Brokerage Account(s) at SchwabYesYes
Net Cost to Open & Maintain Plan over First 7 years$0$0 including $1500 tax credit
Employer Roth ContributionsNoYes
Mega Backdoor Roth ContributionsNoYes
In Plan Roth RolloverNoYes
Solo 401k Participant LoansNoYes
Alternative Investments (e.g., Real Estate, Private Stock, Private Placements, Crypto, Notes, Gold/Precious Metals, etc.)NoYes
Solo 401k Compliance Support (e.g., 5500-EZ, 1099-R, etc.)NoYes
$1500 Solo 401k Tax CreditNoYes
Open Accounts at 100s of banks, brokerages, cryptocurrency and alternative investment platformsNoYes

Vanguard Solo 401k to Fidelity vs My Solo 401k

FeatureFidelityMy Solo 401k
Account Opening ProcessComplete Adoption Agreement and other paperwork1 Min App to Open Solo 401k
Brokerage Account(s) at FidelityYesYes
Net Cost to Open & Maintain Plan over First 7 years$0$0 including $1500 tax credit
Employee Roth ContributionsNoYes
Employer Roth ContributionsNoYes
Mega Backdoor Roth ContributionsNoYes
In Plan Roth RolloverNoYes
Solo 401k Participant LoansNoYes
Alternative Investments (e.g., Real Estate, Private Stock, Private Placements, Crypto, Notes, Gold/Precious Metals, etc.)NoYes
Solo 401k Compliance Support (e.g., 5500-EZ, 1099-R, etc.)NoYes
$1500 Solo 401k Tax CreditNoYes
Open Accounts at 100s of banks, brokerages, cryptocurrency and alternative investment platformsNoYes

Vanguard Solo 401k to E*Trade vs My Solo 401k

FeatureE*TradeMy Solo 401k
Account Opening ProcessComplete Adoption Agreement and other paperwork1 Min App to Open Solo 401k
Brokerage Account(s) at E*TradeYesYes
Net Cost to Open & Maintain Plan over First 7 years$0$0 including $1500 tax credit
Employee Roth ContributionsYesYes
Employer Roth ContributionsNoYes
Mega Backdoor Roth ContributionsNoYes
In Plan Roth Rollover??? Yes
Solo 401k Participant LoansNoYes
Alternative Investments (e.g., Real Estate, Private Stock, Private Placements, Crypto, Notes, Gold/Precious Metals, etc.)NoYes
Solo 401k Compliance Support (e.g., 5500-EZ, 1099-R, etc.)NoYes
$1500 Solo 401k Tax CreditNoYes
Open Accounts at 100s of banks, brokerages, cryptocurrency and alternative investment platformsNoYes

More Resources:

  • Ask Questions and see what others are asking in our My Community Forum for Existing Vanguard Solo 401k Account Holders.
  • Click HERE to get started with converting your Vanguard Solo 401k to My Solo 401k

Original Roth i401k Contributions Maintained QUESTION

Yes, as the existing i Roth 401k would get restated to our solo 401k plan. A restatement results in keeping the original plan effective date; hence why we ask for it on ourĀ onlineĀ application.

Can I Use Fidelity Invesments to Hold the Roth Solo 401k Funds QUESTION

Yes, you will be able to useĀ Fidelity InvestmentsĀ to hold the Roth 401k funds and we will assist you in opening these brokerage accounts with Fidelity as part of theĀ solo 401k restatement process.

Registration of the Solo 401k Brokerage Accounts if I use Fidelity QUESTION

When transferring a Solo 401k account from Vanguard to MySolo401k and setting up a new Fidelity brokerage account, the account would be registered under the Solo 401k owner's name. We assist in preparing all necessary paperwork for opening new accounts at Fidelity and for transferring cash and assets from the existing Vanguard accounts to the new Fidelity accounts. Solo 401k owners have exclusive access to their accounts at Fidelity. Funding after the initial transfer can be done by logging into the Fidelity account and initiating an ACH bank transfer. For redemptions post age 59.5, withdrawals can be made via check or wire, and these transactions are reportable events which we handle by providing the necessary 1099 reporting at no additional charge. Fidelity would provide regular brokerage statements, while MySolo401k would provide the ongoing Solo 401k compliance support.

Ongoing Solo 401k Contributions QUESTION

Correct, the ongoing solo 401k contributions will be made directly to the Fidelity brokerage accounts by you as the trustee of the plan and they can be made electronically (ACH) from your business bank account. We don't hold our clients funds; instead, the client decides on the depository financial institution to hold the solo 401k funds.

Contribute Now or Later QUESTION

Yes, Ā you can and by your business tax return due including your business tax return extension.n max out the contributions now or after you have restated your solo 401k plan.

Multiple Contributions QUESTION

Yes, you can and by your business tax return due including your business tax return extension.

Tracking Contributions QUESTION

The solo 401k holding accounts (the bank/brokerage accounts) serve to track the contributions in addition to reporting them on your personal and/or business tax return

Stock and Fund Trading QUESTION

Correct. Whether your use Schwab or Fidelity ivnestments, for example, for the solo 401k brokerage accounts, you would use that brokerage firms website and only you will have access to the solo 401k funds.

Locating the i401k Original Plan Effective Date QUESTION

You canĀ  locate the original plan effective date from the Vanguard i401k application (aka Adoption Agreement), or by calling Vanguard. Also, if your plan has been filing a Form 5500-ez, you can get the original plan effective date from 1c for that form.

In-Plan Roth Conversions Vanguard QUESTION

The solo 401k that we offer allows for the funds to be held in separate brokerage accounts at Fidelity or Schwab, for example.

For example, if the solo 401k plan only has one participant, 1 (one) to 3 (three) separate bank or brokerage accounts may be needed depending on whether or not the participant chooses to make all three contribution types (pretax, roth and voluntary after-tax) or chooses to convert pretax or voluntary after-tax funds to the Roth solo 401k bucket.

Subsequently, you can convert the pre tax solo 401k funds to the Roth solo 401k through an in-plan conversion where the funds and/or securities are internally movedĀ from the pre tax solo 401k brokerage account to the Roth solo 401k brokerage account.Ā  You would then complete our in-plan conversionĀ form (https://www.mysolo401k.net/pretax-to-roth-solo-401k-in-plan-conversion-form/) so that we can collect the necessary information to issue the Form 1099-R.

See the following procedure for example if you use Fidelity Investments for the solo 401k brokerage accounts.Ā https://www.mysolo401k.net/solo-401k/how-to-process-a-fidelity-investments-conversion-of-pretax-solo-401k-funds-non-prototype-account-to-a-roth-solo-401k/

$1,500 Solo 401k Plan Credit QUESTION

The auto contribution feature in our Solo 401k plans is set up to allow Solo 401k owners to qualify for a $1,500 tax credit. The Solo 401k owner can opt out of the default contribution amount in order to allow the Solo 401k owner to contribute at any amount or schedule they prefer, or even opt not to contribute at all, and still be eligible for the tax credit.

Employee and Employer Roth Solo 401k Contributions QUESTION

Yes, our Solo 401k plans support both Employee and Employer Roth contributions, as well as voluntary after-tax contributions which can be utilized for Mega Backdoor Roth strategies.

Pro Rate Rule QUESTION

For Solo 401k plans, the pro-rata rules apply at the account level. This means that Solo 401k owners can move money from their voluntary after-tax Solo 401k sub-account to a Roth Solo 401k or Roth IRA, even if they have other pre-tax or Roth funds in their Solo 401k. Click here to learn more.

Rollovers Out of the Plan QUESTION

Our Solo 401k plans support rollovers out of the plan to both regular and Roth IRAs, provided the rollover requirements are met, such as the Solo 401k owner being over age 59.5 or meeting other triggering events or exceptions like voluntary after-tax contributions. We handle the required 1099-R reporting as part of our service at no additional charge. Click HERE to learn more.

EIN for solo 401k Plan QUESTION

Yes, you would need to obtain a separate EIN specifically for the Solo 401k plan trust, even if you already have an EIN for your existing business. We would obtain the EIN for the solo 401k as part of the restatement process. Having a separate EIN for the Solo 401k plan helps the IRS clearly identify which funds and income are associated with the tax-deferred retirement account versus your taxable business incom. When income like interest is reported to the IRS under the Solo 401k plan's EIN, it signals to the IRS that this income is growing tax-deferred within the retirement account.

Use Schwab for the solo 401k Brokerage Accounts QUESTION

When opening brokerage accounts at Schwab for your Solo 401k, you will typically need to open multiple brokerage accounts rather than just one account. Each brokerage account is opened in the name of the solo 401k using the plan's EIN and used for tracking different contribution sources - one for pre-tax funds, one for Roth funds if applicable, and one for voluntary after-tax funds if applicable. This setup of separate Schwab brokerage accounts for each participant and contribution source (pre-tax, Roth, after-tax) is how the different Solo 401k contribution types are properly tracked and accounted for. If applicable, your spouse would also need their own separate participant account if they are a participant in the Solo 401k plan. We would assist in opening each brokerageĀ  account at Schwab as part of the solo 401k setup process.

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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