Solo 401k Questions: Solo 401k Roth Conversion | | Terminating Solo 401k

 QUESTION: If possible could I please ask a couple questions before I proceed to open solo 401k? First, what happens if I decide to close my business?  Can the Solo 401k plan remain open or must I roll over to an IRA? 

ANSWER: Once you cease  self-employment through the business that sponsored the Solo 401k, you cannot continue to operate the Solo 401k and thus have the following options:

Option 1: Transfer/direct rollover the Solo 401k plan assets whether cash or in-kind—for example, if you invested your self-directed Solo 401k in a piece of real estate in Houston TX and do not want to sell the property, you could transfer the Houston, TX rental property in-kind to a self-directed IRA.

Option 2: Transfer the Solo 401k assets to another 401k sponsored by another employer or new business start-up.

Option 3: Take a full Solo 401k distribution and pay the applicable income taxes.

Under all 3 Solo 401k termination options, applicable tax reporting applies; however, income tax payments would not apply under option 1 and 2 above, but would apply under option 3 above. Lastly, the Solo 401k plan would have to be formally closed by filing a final Form 5500-Z with the IRS.

QUESTION: Second, considering the much higher tax rates likely for the coming decades is it possible to convert my entire Solo 401k to a Roth this year and if so what is the process for doing so?

ANSWER:  Yes as a Solo 401k provider our Solo 401k document allows for Roth Solo 401k in plan conversions.  To learn more visit in-plan rollovers to Roth Solo 401k.