Tuesday, January 1, 2013

Change Solo 401k Plan Providers




QUESTION: I am interested in your solo 401k.  I opened a solo 401k at fidelity in 2012 but I have not funded it and do not intend to.  I did research and your solo 401k with the option to have the fidelity account part of it seemed appealing.  I am thinking of using the fidelity account for short term investments until there is enough capital in it to purchase real estate or fund a loan.

My question is how that would work.  Usually it would be a distribution.  I would just want to purchase some stocks for 6-9 months until the solo 401k account has enough funds to do with what I want or possibly purchase some bonds.

Thank you, MH

ANSWER: When you open a solo 401k with our company, we will provide you with the necessary Fidelity forms to open a brokerage account at Fidelity that will name you as the trustee and administrator of the Solo 401k plan. Because Fidelity is not performing either of these rolls, you will not use their Solo 401k plan documents, but rather ours as your new solo 401k provider. As such, because you are not closing your Solo 401k plan, a final form 5500-EZ, an informational tax return that must be filed when a plan terminates, will not need to be filed with the IRS. Instead, we will compose a cover letter addressed to Fidelity informing them that you have decided to use our company as us your Solo 401k plan provider for your submission with our solo 401k plan documents and Fidelity brokerage account forms. The end-result will be a self-directed solo 401k plan that will afford you the option to not only continue investing in stocks, mutual funds and bonds, but also alternative investments such as precious metals an real estate, in addition to gaining option  to borrow from your solo 401k through  a solo 401k loan.

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