QUESTION: After I process a solo 401k loan, I need
the remaining 1/2 of the solo 401k funds for less than 60 days. My understanding is that I can
withdraw it and put it back as a roll over. Is that correct?
ANSWER: It is not quite
that simple as a mandatory 20% for federal taxes must be withheld at the time
of the solo 401k distribution with the funds wired to the Department of the Treasury; as a result, you
only end up with 80% that can be rolled over, unless you can come up with the
other 20% with outside funds. This rules is different when compared to an
IRA, as IRAs are not subject to the mandatory 20% withholding.
See the following
language from the following IRS website.
Eligible Rollover Distributions
Withhold 20% of an eligible rollover distribution unless the recipient elected to have the distribution paid in a direct rollover to an eligible retirement plan, including an IRA. With certain exceptions, an eligible rollover distribution is the taxable part of any distribution from a qualified plan, governmental Internal Revenue Code section 457(b) plan, tax-sheltered annuity, or IRA. For more information, refer to Chapter 8 in Publication 15-A, Employer’s Supplemental Tax Guide.MORE RESOURCES
Solo 401k FAQs
Solo 401k Distributions
