Comments on: Rollover IRA to Solo 401k

By: TFB

TFB — Fri, 03 Feb 2012 08:24:05 +0000

Fred – (1) Yes, it’s a different business, but you can also roll into your existing 401k plan.

(2) Not difficult at all. Download the blank form. You will see. Yes you get an EIN even if you don’t have employees.

(3) No effect on rolling pretax money to a 401k. Not much effect on converting the non-deductible money either. In the update to my other post Backdoor Roth: A Complete How-To, I suggested adding a time buffer between contribution and conversion. If you already have non-deductible money in your IRA from previous years, I don’t think you need a big buffer. By the time you are done with rolling the pre-tax money, you will already have a buffer.

By: Fred

Fred — Fri, 03 Feb 2012 06:48:23 +0000

TFB – I hope you keep checking back to this post for questions and comments. I’m considering opening up a solo 401(k) in order to be able to do the back door Roth conversion with the non-deductible contributions portion of my IRA, but I had three questions for you:

1. Can I open a solo 401(k) for myself (I can generate some separate self-employment income) even if I already have a 401(k) plan at the firm in which I am a partner, and thus my existing 401(k) is also funded by other self-employment income?

2. I will have to fill out the Form 5500-EZ. How difficult has that proved to be for you? I notice it asks for an EIN that is not supposed to be your SSN; do you have to obtain an EIN for the 401(k) plan, or do you obtain an EIN for your self-employment “business,” even though you don’t have any employees?

3. I just made my 2012 non-deductible contribution into my IRA last week. Will that affect if and when I can do the rollover from my IRA to the solo 401(k), and when or in what amount I can convert the left-behind non-deductible contributions to a Roth IRA this year?

Thanks for your help.

By: TFB

TFB — Wed, 09 Mar 2011 06:35:51 +0000

@Tai – Include gains.

By: Tai

Tai — Wed, 09 Mar 2011 05:02:01 +0000

Thanks for the thorough explanation; I am looking into exactly the same thing with my company’s 401k. One the I would like to have clarified is whether the transfer to the 401k of pre-tax dollars in the IRA includes the tax-deferred gains or is limited only to the deductible contributions made previously?

Thanks,

By: Rani

Rani — Tue, 14 Dec 2010 07:54:48 +0000

I have same problem, but I just realized this issue. I have rollover IRA from precious 401k and I have non-deductible IRA
(both in seperate accounts) Now can I rollover my rollover IRA to current 401k
and then roll over non-deductible IRA to Roth

would I still have tax consequences??

By: sep ira rollover student

sep ira rollover student — Thu, 21 Oct 2010 20:28:42 +0000

Trying to figure out if I should do a SEP IRA rollover. Lots of info here.

By: TFB

TFB — Wed, 16 Dec 2009 23:22:41 +0000

Brad – Not being able take money out of solo 401k as easily as you can with a Traditional IRA is a limitation. Except being under your own control, a solo 401k works just like any other 401k. When you have a 401k with an employer, you can’t take money out and convert to a Roth IRA until you terminate employment, retire, die, or become disabled.

However, you seem to have conflicting objectives. On one hand you don’t want to pay taxes on your conversion. On the other hand, you want to pay taxes on your ongoing contributions to your solo 401k and make it Roth. If you pay tax on the conversion and contribute to a Traditional 401k, you will achieve the same thing.

Technically it’s possible to maintain two 401k plans. You just make your life more complicated that way. If your situation is really complicated, you should talk to a paid advisor.

By: Brad

Brad — Wed, 16 Dec 2009 21:55:42 +0000

TFB,

Great explanation of using a solo 401-K to shelter pre-tax IRA dollars.

Let’s say I move ALL my pre-tax IRA dollars to the solo 401-K and do a Roth conversion of my post-tax IRA balances only.

What happens if I decide later on that I want to convert some of the pre-tax dollars to a Roth IRA. How do I do that? Any limitations here? The Fidelity guy said once I’ve transfered the IRA into the 401-K I can’t get it out….Roach Motel?

Bonus Question….I have a Vanguard solo-401-K because they have the Roth option, but they don’t accept transfers as you know. Fidelity accepts transfers but doesn’t have the Roth option. You see any problems maintaining solo 401-K plans with both providers?

By: TFB

TFB — Fri, 04 Dec 2009 23:28:59 +0000

nickel – The SEP bit does not make any sense to me, although I never had a SEP. I started with a solo 401k. I think the rep confused between establishing a 401k versus contributing to one. Checking with your accountant is a good idea.

You do have to adopt the new 401k with Fidelity. If you want to keep the same Vanguard funds, they will want you to do the two-step I mentioned in the post anyway. So your asset transfer will be initiated from a Fidelity IRA. You can do that online. It only took a few days for me. After the assets arrive at a Fidelity IRA, you write a letter and roll over the IRA to the solo 401k.

By: nickel

nickel — Fri, 04 Dec 2009 21:42:05 +0000

TFB: Just got off the phone with Fidelity and was told that I can’t do the SEP to 401(k) rollover this year because I’ve already made contributions to the SEP during 2009 and I’m not allowed to have both accounts in the same year (?). I said that I had already maxed out what I’ll be putting into the SEP, so I won’t actually make any 401(k) contributions until next year. He checked with the help desk and they were still of the opinion that I cannot do this. I have a call in to our accountant, but I’m wondering if you can shed some light on this… Did you contribute to your SEP during the year before you executed the rollover?

I was also surprised to learn that I have to adopt the new 401(k) with Fidelity and then work with Vanguard to get the money moved. Does that sound right to you? All of my rollovers in the past have involved filling out paperwork with the recipient institution and then letting them go get the money themselves.