Friday, April 20, 2012

Solo 401k Checkbook Control Explained (process/procedure) Easy Guide from A-Z


After you open solo 401k with checkbook control (solo 401k checkbook control), the next step is to open checking account for solo 401k at your local bank. In some cases multiple checking accounts for same solo 401k trust might be necessary.

For example, multiple checking accounts are required if both participants/trustees participate or if you plan to make both Roth solo 401k and regular solo 401k contributions.

What is more, not all banks have trained their bankers on solo 401k checkbook control, so you are often greeted with a puzzled look from the banker.  Well, to make the process much easier, we have composed following explanation and procedure for your local banker’s reference after you open solo 401k (i.e., execute the solo 401k adoption agreement from your solo 401k provider).


 


Background
  • Solo 401k falls under IRS Code
  • Solo 401k is a type of Trust
  • Solo 401k is a simplified version of a 401(k) and is only for the self-employed with no full-time common law employees.
  • You as the business owner are the named solo 401k plan trustee
  • The Trustee makes all decisions for solo 401k trust, including where to open checking account for holding liquid funds.
  • Since you are the trustee, the bank where you open solo 401k checking account will not be providing services such as custodial, fiduciary or custodial services.
Solo 401k Checking Account Guide/Logistics
  
Solo 401k Documents Provided to Bank
  1. Present executed Solo 401k Adoption Agreement to banker
  2. While it is generally not necessary to provide copy of 50+ page 401k Basic Plan Document, it may be provided upon request.
Bank Account Checking Account Application
  • Account holder is the solo 401k plan
  • Responsible party (having signing authority) is the trustee(s)
  • The EIN or TIN is the Solo 401k Trust’s not the trustee’s social security number
  • The EIN for Solo 401k is listed on the Solo 401k Adoption Agreement
IRS W-9-Request for Taxpayer Identification Number and Certification
  • Name and Business Name list name of solo 401k (e.g., Jane Do Solo 401k Trust)
  • Check off “Trust”
  • Other, write Solo 401k Retirement Trust
  • Check off “Exempt payee”
  • List address of solo 401k trustee
  • List EIN for Solo 401k Trust
Common Questions when opening solo 401k checkbook control checking account
Question: Account Name/Plan Name
Answer: Use solo 401k plan name (e.g., John Do Solo 401k Trust, ABC Solo 401k Trust)
Question: Trustee/Manager
Answer:  you are the named trustee
Question: Signature Requirements
Answer: Trustee’s signature to process transactions on behalf of solo 401k trust
Question: Banking Features
Answer: All banking features, except for credit card or line of credit since you cannot issue personal guarantee, can be exercised.  Features that can be used are check writing, online banking, ATD/Debit Cards, ACH & Wire transactions.
Question: W-9 Form
Answer: If asked to fill out IRS form W-9, “Request for Taxpayer Identification Number and Certification”, in the 3rd box for entity type, mark “other”, enter “Solo 401k Retirement Trust”, check the box indicating Plan is and Exempt Payee.  Write in EIN for Solo 401k trust (see page 1 of Adoption Agreement).

Additional Information
Read our blog on:  on advantage of solo 401k checkbook control
Read our Blog on: IRS Solo 401k


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