Can I fund Solo 401k via IRA Rollover?

While reading your FAQs about opening a Solo 401k, I saw the following:

"How long do I have once my previous 401k is terminated to roll those funds
into my new Solo 401k plan?

You have 60 days from the day you receive your rollover check to roll your
funds over"

QUESTION: What if I have a Rollover IRA that contains 401k rollovers from several
previous employers over many years? Can I use some of that Rollover IRA to
fund a Self-Directed Solo 401k? After I open Solo 401k, can I add additional funds to the Solo 401k from that Rollover IRA later if I wish.

ANSWER: At the time you transferred/rolled over your former employer 401k plan to your Traditional IRA, your retirement account ceased being a 401k; therefore, your current retirement account is considered a Traditional IRA or what some in the industry like to refer to “Rollover IRA.”  Yes the rollover rules permit the rollover of IRA to a Solo 401k and vice versa. Further, partial direct rollover and rollovers are permited, but the latter only allows for one every 12 months. This is discussed further below. 

2 Ways to move Traditional IRA/Rollover IRA funds to Solo 401k

What’s more, there are two (2) ways to move traditional IRA funds to another retirement plan including Self-Directed Solo 401k, which are:

Rollover: When moving funds from a Traditional IRA to a Solo 401k via a “rollover”, the distribution check is made payable in your name (the IRA holders name) and tax reported on Form 1099-R by the IRA custodian as either an early distribution using code 1 if you are under age 59 ½ , or reported as a normal distribution on Form 1099-R using tax reporting code 7 if you are age 59 ½ or older at time of distribution. You then have 60 days from the date you receive the IRA check to deposit the funds to your Solo 401k account  or another IRA in order to avoid paying taxes, and the 10% early distribution penalty if you are under age 59 ½.  Lastly, the IRA rollover rules only allow one IRA rollover every 12 months.  

Direct Rollover: Under a direct rollover, the IRA custodian makes the check payable to the Solo 401k and reports the Traditional IRA direct rollover by issuing Form 1099-R and using tax reporting code G. As trustee of the Solo 401k, you then deposit the funds into the Solo 401k’s bank account.  You can process as many Traditional IRA direct rollovers because the 12 month restriction (1 rollover per 12 months) does not apply to direct rollovers.  

Lastly, even though you have option to fund Solo 401k via a rollover or direct rollover from your Traditional IRA, you first must qualify to open Solo 401k. To qualify for Solo 401k, you must be self-employed with no full-time employees.  

Thank you,
BK