I am going to be doing a debt consolidation loan to my brother-in-law using my Traditional and Roth Solo 401k (because I don't have enough in any single account). I have opened the Solo 401k checkbook accounts and have a separate account for each the Traditional and Solo 401k. For payment of the loan amounts, do I need to have him make out two separate checks/transfers each month or can one check be deposited into the Traditional account and then immediately transfer the appropriate amount to the Roth account (based on % of initial loan amount)? This is my first time doing this and I could use some guidance.
I suppose you paid a plan provider to establish your Solo 401(k) plan. If so, and if you hired a reasonably competent firm (not just a document mill), then they should be more than happy to support you with answers to such questions and you should not need to rely on an internet forum for advice.
That said, one check for payment is fine. You just need to create a good paper trail and reconcile internally between your two plan accounts.
Thanks. I have asked the question of the provider as well.
Many people use one bank account and then have a class for the Roth and another class for the traditional in the software such as QBs. The money is allocated porrata inside the same account but into each class type. The monies are seperate on paper but in one plan account.
If I could I would get 2 checks to keep things as clean as possible. However it sounds like it is going into the plan and the immediate transfer to the Roth is your bookkeeping approach which seems antiquated today. Verify with your administrator/CPA or 5500 tax filer. This is really a bookkeeping and accounting question.
you are making on investment transaction so there should be single check made for the payment. The fact that you are using different types of monies is something that you want to track internally as plan administrator.
While this is a good question for your solo 401k provider, I would not commingle the Roth and pretax note payments. Thus, I would not deposit funds intended for the Roth in the pretax account. Two separate checks--one for each source would be best.
I appreciate everyone's input on this!