Favorite Solo 401K company? Why?
Investor · Mission Viejo, CA · Member since 2012 · 627 posts · 204 votes
What is you favorite solo 401K company? Why?
I see that My Solo401K.net has a very nice web site with loads of useful information.
I see that BroadFinancial.com also has a nice web site, but you have to call to learn their fees.
Thanks @Jeff S. for the advice, and I didn't mean to say you were old.... just older than me :) I will read the thread, and I will contact Mr. , if anything to ask some question via BP. I appreciate your help, and its my honor and privilege to serve men (and women) like those here on BP.
Do not forget that the assets need a formal valuation:
According to IRS and Dept of Labor:
Valuation Requirement
The fair market valuation of 401k assets is essential to compliance with the Internal Revenue Code requirements.
The valuation of 401k assets must be accurately determined to ascertain
(1) Prohibited transactions;
(2) Exclusive benefit violations under IRC 401(a);
(3) Violations of the limitation on benefits and contributions under IRC 415;
(4) Excess deductions under IRC 404;
(5) Violations of the minimum funding requirements under IRC 412; or
(6) Discrimination violations under IRC 401(a)(4).
In a profit sharing or 401k the valuation of 401k assets will determine the value of a participant’s account, and ultimately, a participant’s distribution.
Solo-k Asset Valuation Formality
(1) Whether a formal valuation is required will depend on the transactions that occur with the plan and the form of the plan.
a. For example, the valuation in a single participant plan, a self-directed account, or frozen plan can be less formal in a year in which the plan or self-directed account receives no contribution and makes no distribution or change in investment.
(2) The reasonableness of the method for valuing plan assets is based on the surrounding facts and circumstances.
Timing of Solo 401k Asset Valuation
Rev. Rul. 80–155 requires that a defined contribution plan’s assets be revalued at least annually.
If the requirements of Rev. Rul. 80–155 are not met, the plan is not qualified.
(1) In a defined contribution plan, Rev. Rul. 80–155, 1980–1 C.B. 84, provides that since amounts allocated or distributed to a participant must be ascertainable, the plans must value their trust investments—
(1) at least once a year,
(2) on a specified date,
(3) in accordance with a method consistently followed and uniformly applied.
(4) DOL Reg. 2510.3–18(b)(2) defines “fair market value” as the price at which an asset would change hands between a willing buyer and a willing seller when either party is not under any compulsion to enter into the transaction.
(5) Rev. Rul.59–60, 1959–1 C.B. 237, provides guidance for determining the value of plan assets. Although Rev.Rul. 59–60 provides methods for valuing shares of stock of closely held corporations for estate and gift tax purposes,the factors may be used to determine values of assets in qualified plans.
a. The factors in Rev. Rul. 59–60 are not an restricted list of factors for valuing closely-held employer securities. Other factors may be included where appropriate. Also, not all of the listed factors will be relevant to all companies and transactions.
(6) The detail of the asset’s valuation is examined in light of the plan assets involved.
a. As example, the valuation should contain extensive detail if it values a limited partnership interest or a closely held corporation.
Real Estate
(1) Mortgages valued at cost may be incorrectly valued if based solely on the purchase price of the real estate.
(2) The mortgage’s valuation should reflect the current value of the real property.
a. For example, if the fair market value of property held for investment by the plan is lower than the indebtedness secured by the property, the value of the mortgage should be marked down. Also, the value of the mortgage is based on the loan balance.
(3) An improper valuation of qualified plan assets can cause a plan to exceed the limitations on benefits and contributions .
a.This could occur, for example, if there was an exempt contribution of undervalued property to a plan and the resulting annual additions to participant accounts based on the improper valuation are within the limits of IRC 415,but the annual additions based on fair market value of the contributed property would exceed the IRC 415 limits.
b. Similarly, there could be excess annual additions if property were sold by the plan for more than fair market value.
(4) In extreme cases, an exclusive benefit violation under IRC 401(a)(2) may occur if a qualified plan engages in a prohibited transaction in which it acquires property for more than fair market value.
Just an issue to be aware of when deciding to do your Solo 401k Plan without any professional help
The comments in this thread impress me. It's great that so many people on the board are knowledgeable through their own experiences.
The only thing I'd like to add is a concern for continued plan maintenance. There are many "one-stop-shop" 401k package sellers out there that give you everyone for a flat rate price. Some are better than others but ask what they'll do for you to help keep your plan in compliance over time. If they go out of business, you'll obviously be responsible at that point.
One of the many reasons self-employed individuals choose the individual 401K is to save on administration fees. However, all those savings don't really mean much if you have other large costs along the long path to retirement.
Be mindful that if you have a 401k and it's not kept in compliance, it will make things really easy for the IRS to simply condemn the plan and present you with taxable assets.
I used My Solo 401K http://www.mysolo401k.net/ to set up a 401K Trust for my LLC. The trusts holds a non-prototype 401K account with checkbook control at Fidelity. The advantage of having the Fidelity account is that I can hold mutual funds until I want to invest in my self-directed investments and real estate deals. But I have a checkbook just like the money was in a bank.
The folks at My Solo 401K know Fidelity and solo 401K's better than Fidelity. It would not have been possible to get this setup started without My Solo. I cannot recommend My Solo highly enough.
>KNC<
You really do not need to pay any provider annual fees. I found that the boilerplate plans are obtained from much larger companies which specialize in such things. The plan needs to be kept up to date, but in simple plans, not some big company 401K, that is not so complex.
That said, I sure wish the government was completely uninvolved. Our money is none of their business, and I resent all of the time and effort wasted and complexity generated by having different pools of money.
In my experience I've found that professional help is well worth the price.
One friend with a Solo-k failed to sign the simple 5500EZ and ended up being fined $1800.
Another friend used a boiler plate document template like Mr. Masek suggests and found that when he hired some temporary help for a day, the plan document provided for immediate eligibility and the new individual became eligible that day. The repercussions of this simple mistake was the solo 401k plan became a regular 401k plan with all of the additional regulations that regular 401k plans are subject to. My friend decided to close the plan and open an IRA to avoid all of the additional costs. Now he has to wait 2 years before he can open a new 401k plan and transfer the IRS assets to the new plan.
A third friend thought the solo 401k plan only applied to his main company. He did not realize when he started another company and hired employees that the other company employees became eligible for his Solo 401k Plan. He had to convert to a regular 401k plan.
I have learned from my friends' simple mistakes to check with a professional before I do anything and have the work I do myself checked.
Lawrence, all they had to do was read the plan and the regulations.
Thank you for the feedback regarding the self-directed solo 401k.
I am not sure if this the right place to ask but I am looking at transferring money from a UK Retirement Plan into a Solo 401k.
Related to this I have a few questions, one of which was unclear from an earlier question.
1. The money is coming from a UK retirement plan, can I transfer it directly to a Solo 401k without using it has income?
2. If that is the case, do I have to watch the salary amount i earn for that business (what if it generates a loss)?
3. Can I have a RE business and run a solo 401k within that as long as I keep my personal RE separate from the Solo 401k RE?
I have many clients that buy properties with me. Jim Hitt with American IRA has helped them Google them. He manages over $300,000,000.00 in assets. He has managed funds and is a wise business man with real estate investing experience. Also I believe Dmitriy can help you as well.
If you need real estate mentorship or advise I can help you along the way. This is a tough business and should be entered into with your eyes wide open.
Craig
@Edwin E
I use Pensco for my SDIRA. I set up a check book llc, and I also lend out of it. A few posters have mentioned how straightforward the rules are for prohibited transactions. I would disagree with them. Yes once you have experience doing a few deals, the rules become more familiar. However when you are starting out it can be easy to blow up your sdira because you don't know what you don't know. I would run everything by a competent CPA. Believe me it will be worth the money! As for Pensco, I am happy with my experience. They have stopped me from making prohibited transactions and I feel they truly are interested in keeping their clientele satisfied. I find getting a representative on the phone is easy and the Pensco staff to be extremely knowlegeable. That said they cannot offer tax advice so get your own.
Good luck!