Funding a solo 401k: Rollover and/or annual contributions

QUESTION 1: I have a couple of questions about opening a new Solo 401k account with you guys.

If I currently do not have an IRA or 401K to roll over, can I open a new account with you guys?  What is the minimum deposit amount?

ANSWER:  In addition to funding a solo 401k with rollover funds from IRAs or former employer plans such as 403b, 401k, 401a, 457b DBP, etc., yes a solo 401k may be opened and funded with periodic contributions. Of course, before you can open a solo 401k, you have to qualify—that is, you have to be self-employed and have no full-time employees. Please click here to read these important solo 401k opening requirements.  

QUESTION 2: Once the account is open, can I make monthly deposits?  If so, can I just mail a check? Wire transfers? 

ANSWER: Yes solo 401k contributions may be made at any rate (e.g., weekly, monthly, quarterly, every 6 months or yearly). The IRS solo 401k contribution requirement is that the contributions are made by the business tax-return due date plus extensions and that the annual contribution limits are not exceeded, which are as follows for 2013 and 2014.

Type 1 Contribution: Employee contributions also known as elective deferrals up to 100% of net earnings from self-employment income up to the annual contribution limit:

• 2013 and 2014: $17,500 or $23,000 if age 50 or over; and

Type 2 Contribution: Employer profit sharing contributions up to

• 25% of earned income after deducting one-half of self-employment tax.

Total Contributions: Total contributions to a solo 401k plan cannot exceed $51,000 for 2013 and $52,000 for 2014, plus an additional catch-up amount of $5,500 if age 50 or older.

Lastly, the contributions can be transmitted by check or by wire and deposited directly into the solo 401k bank account or solo 401k brokerage account. You may also visit FORMS to download the annual contribution form to help document the solo k contribution(s).

QUESTION 3: Are there any fees for each deposit I make?  I would like to be able to deposit to it monthly.

  

ANSWER: Deposit fees would not apply on our end as you solo 401k provider.  

QUESTION 4: Can I borrow against it in the future if I need to as with traditional Solo 401k’s? 

ANSWER: Yes, borrowing from a solo 401k is referred as a solo 401k participant loan, and the solo 401k plan that we offer allows for multiple solo 401k loans.

Thanks,

Sandra in Florida

Direct Rollover to a Solo 401k plan after processing one IRA Rollover in twelve months

QUESTION: Please send me a answer to my question where or not I can do a direct-rollover contribution to my new solo 401k plan form my Traditional IRA since I already did a 60 day IRA rollover contribution to my IRA back in March of this year.

ANSWER: I read IRS Pub 590 (the publication that applies to IRAs) and it appears that even though the 1 per 12 month rollover rule has already been exercised, that if you now process a direct-rollover to a solo 401k instead of a rollover it would be okay. A direct rollover means that the IRA distribution check would be made payable in the name of the solo 401k and a letter "G" would be used by the IRA custodian processing the direct rollover check to report the direct rollover on Form1099-R. So the key is to have the check made payable in the name of the solo 401k not in your name, as the latter would be deemed a rollover.

Thank you, Zach in Maryland