Self-Directed Solo 401k IRS Distribution Rules

A includes employee (salary deferral) and employer (profit sharing) contributions. Each contribution type has separate distribution rules.


TYPE 1: Employee contributions under a self-directed solo 401k have more stringent distribution rules. For instance, employee contributions generally cannot be distributed unless one of the following events apply:

• attainment of age 59½,
• plan termination

TYPE 2: Employer profit sharing contributions distribution rules are more lax. For example, employer contributions may be distributed/transferred to an IRA after a 2 year holding period has been satisfied, even if the participant is under age 59 1/2. However, if the participant is over age 59 1/2 the profit sharing contributions can be distributed/transferred to an IRA at any time.

IMPORTANT:  A special rule applies to ROLLOVERS and TRANSFERS that have been deposited into a self-directed solo 401k. The distribution rules are more lax for amounts that have been transferred into a self-directed solo 401k from other IRAs or qualified plans. These amounts can be distributed or transferred out at any time to an IRA or another 401k.

To learn more about the self-directed solo 401k distribution rules, click on "."