Process for Terminating or Closing a: Solo 401k | Solo K | Individual 401k | Individual K

Does a Solo 401khave to be maintained indefinitely? Although all qualified retirement plans, including Solo 401k plan or Individual K, are required to be established with the intention of being continued indefinitely, the IRS has outlined procedures for terminating a Solo 401k or Solo K.

What's the IRS required process for terminating a Solo 401k? After the assets have been distributed (e.g., taxes are paid on distribution or assets have been transferred to another 401k or IRA), a Final Form 5500-EZ, Annual Return of On-Participant (owners and Their Spouses) Retirement Plan, must be filed with the IRS. See IRC Sec. 6058a.

IMPORTANT:In the year in which final distribution occurs, even if the assets are under $250,000, Form 5500-EZ is always required, even if the employer has never filed one before.

What's the deadline for distributing all assets from a terminating Solo 401k? All Solo 401k plan assets generally must be distributed within one year of the Solo 401k termination date.

What's the due date of the final Form 5500-EZ? The final Form 5500-EZ is due at the end of the seventh month following the month in which all Solo 401k plan assets are distributed.

Who Must File Final Form 500-EZ?

The plan administrator or employer/Trustee is responsible for filing the annual 5500 series return.

Is a Final Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., required when closing out Solo 401k?

Yes a final Form 1099-R must be filed with the IRS when terminating a Solo 401k or Solo K.