Posted over 7 years ago

Solo 401k Roth | New Solo 401k Roth Rules


The new updates to the Solo 401k Roth regulations effective 2013 and future years further support why solo 401k owners should at the very least consider processing a partial in-plan Solo 401k Roth conversion.

The American Taxpayer Relief Act of 2012 now allows for the conversion of all solo 401k amounts to a solo 401k Roth. Previously only the following funds could be converted to a Roth solo 401k.

 - Pretax amounts rolled over into the Solo 401k plan from IRAs or other qualified plans, and

 - Employer and salary deferral contributions but only after meeting certain qualifying events such as reaching age 591/2.


However, thanks to the new Roth solo 401k rules the following amounts now qualify for an in-plan Solo Solo 401k conversion:

 - All employee contributions, and

 - All profit sharing contributions

Nonetheless bear in mind that the following pretax Solo 401k amounts still do not qualify for an in-plan Solo 401k Roth conversion because they are not considered eligible distribution amounts.

  •  - A distribution that is one of a series of substantially equal payments made at least annually over a lifetime or 10 years, or

The tax results of in-plan Roth Solo 401k conversion/rollover

The amount converted less any basis is added to gross income for the year of the conversion; however the 10% early distribution penalty does not apply even  for those under age 591/2. 

Compliance Note 1: If the amount converted to a Solo 401k Roth is later distributed before the 5 year waiting period, the 10 percent early distribution penalty applies.

Compliance Note 2: Unlike a Roth IRA conversion, which can be reconverted to a traditional IRA, the IRS Solo 401k rules do not allow for Solo 401k Roth re-conversions. Therefore, make sure to first fully confirm that a Roth Solo 401k conversion is what you want to do because you cannot later change your mind.

Compliance Note 3: The 20% mandatory federal tax withholding that generally applies to Solo 401k distributions does not apply to amounts converted to a Roth Solo 401k but only if the participant does not touch/receive the funds first. As such, the amounts converted should be directly deposited to the new designated Roth Solo 401k bank account in order to avoid the mandatory up-front tax withholding amount. 

To learn more about the Solo 401k plan rules, including how to invest in real estate, visit: or call



Comments (1)

  1. Thank you Mark Nolan for this informative post! If I'm not mistaken I could carry two separate retirement 401k/or solo401k plus an additional roth IRA. However, does the Solo 401k Roth still allow persons to carry a separate retirement account?