Wife Solo 401k Contributions | Control Group | Full-Time Employer 401k

QUESTION 1: I am in the process of doing a direct roll over for my spouse SEP-IRA account to Solo 401k and need to send the “IRA Transfer form” to the current custodian. I believe the expectation is that we would send this form directly to the current custodian, is that correct? Do you need any documentation from us at this point for this?

ANSWER: Correct in that you would complete and submit the SEP IRA transfer form that we provided to the current SEP IRA custodian. We only need to see a copy if you would like us to review it. Since you are the named solo 401k trustee, you will keep a copy for your records.

QUESTION 2: My spouse is working full time for another employer (W-2) as well where she has not participated in their 401(k) plan for the year 2013. She will be making contributions in only Solo 401(k). Do you see any issues with this?

ANSWER:  As long as your wife generates earned income from the business sponsoring the Solo 401k she can make annual contributions up to the statutory limit, which is $51,000 for tax year 2013. Please visit our online solo 401k contribution calculator to calculate your respective 2013 solo 401k contributions. Please also visit making contributions to multiple 401k plans to learn about how you can contribute to a day-time job employer 401k plan and a solo 401k for the self-employed.

QUESTION 3: The current solo 401(K) plan I have established is for main company (XYZ Consulting LTD). I do have another LLC – with 2 more partners (my spouse is not part of it) but currently there is no business activity in this LLC (have not even opened a bank account for this LLC at this point). However in few months, it is likely some revenues might start to flow. If this company expands and we have W-2 employees or I start getting some income from this LLC, will it have any impact to my main company & its Solo 401(k)?

ANSWER: Excellent question. You will most likely not qualify to continue to participate in a solo 401k if you are an owner in another company, such as an LLC, that has full-time W-2 employees. Reason being, when qualifying for a solo 401k and to continue to qualify for a solo 401k, the IRS requires that all businesses be treated as one for determining eligibility and making contributions to a Solo 401k. This is known as the controlled group test. Click here to learn more about it.

However, since we offer traditional 401k plans for companies with full-time employees that can also be self-directed into alternative investments such as real estate and precious metals, we can always covert your solo 401k to a traditional 401k.


Ron in Virginia

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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