Rental Property Investor · San Mateo, CA · Member since 2017 · 3 posts · 0 votes
Hi folks!
I have been reading a lot about solo 401k this week and I have a question that I haven’t been able to find an answer to l:
My wife is self-employed with significant taxable income and is eligible to open a solo 401k account.
I’m fully W2 employed and have a 401k account at work, but what’s more important is that I have several existing 401k accounts from previous employers.
If my wife opens a solo 401k for her sole proprietorship, can I rollover MY old 401k funds into her solo account?
Accountant · Tulsa, OK · Member since 2018 · 312 posts · 349 votes
7y
@Vlad Gurovich not super familiar with solo 401k's but I always thought the rule was that you have to earn income from that self-employed company in order to be able to contribute, so if you aren't earning any income from her sole proprietorship, then I don't think you can. Here's an old thread where it's discussed:
As spouse you could participate in your spouse's Solo 401kONLY if you are eligible: employed in your wife's business. This doesn't seem to be the case from your description so the answer is no. To help you understand this further: just like your spouse can't participate in your employer 401k just because she is your spouse.
You would need to be a compensated employee of your wife's business in order to be eligible to participate in her Solo 401(k) plan.
If you are not already legitimately involved in and compensated via her business, the cost of doing so in a compliant fashion is generally higher than establishing your own separate self-directed IRA based plan.
Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
7y
@Dmitriy Fomichenko/@Carl Fischer/@Brian Eastman -If @Vlad Gurovich lives with his wife in CA, which is a community state, doesn't that make him an owner/member of the wife business? Or isn't as simple as making him a member manager of the business to qualify/allow him with the company Solo 401K? And then he might not be able to make contributions since he has 401K with his employer (or depending on how much he contributes to one vs the other), but for sure he can roll over his older 401K and traditional IRA and invest it from his own Solo 401K ?
California community property laws do not apply here.
The issue is that Vlad would need to be a compensated employee of the business. Whether he is an owner or not does not matter. A non-compensated owner does not quality to participate in a 401(k) plan.
Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
7y
@Brian Eastman - he needs to be compensated in order to make his own deferral contributions. But isn't the Solo 401K plan established per company, thus both husband and wife getting their own complement of Solo 401K and Roth Solo 401K in which they can roll over their older 401K and traditional IRA (except Roth ones) and take advantage of the other benefits of a Solo 401K, which is what Vlad wants?
He must be a compensated employee in order to be able to PARTICIPATE in the plan at all.
A 401(k) is an employer sponsored retirement plan. To be eligible to participate in the plan, one must be a compensated employee of the business that sponsors the plan.
Brian is correct, he would need to be an employee to participate in the plan before he could roll in funds or make contributions. I do think that it can be worth it to make this change to gain spousal participation in a plan in some cases, though.