Tag: One-Participant 401k
Checkbook Solo 401K: Year End 2017
Happy New Year to All!
2017 has been an exciting year for checkbook control – from the explosive emergence of Cryptocurrency to Tax Reform – we in the self-directed retirement community have had a stake in the evolution of the investment and tax landscape. In this post we’ll highlight how 2017 regulatory events relate to Checkbook Solo 401k investors and provide year-end tax planning tips.
Continue reading “Checkbook Solo 401K: Year End 2017”
Solo 401k Loan FAQ & Answers
Solo 401K Roth Contribution Q&A
What is a Roth Solo 401k Plan? What is a Solo 401k Plan?
Understanding Roth Solo 401(k)s requires that we first understand the basics of traditional Solo 401k plans. 401K Plans, creatively named after Section 401(K) of the Tax Code, are Defined Contribution qualified retirement plans that allow employees to choose (“elective deferral”) to contribute all or part of their compensation to a tax-advantaged account and exclude the amounts contributed from current taxable income. The tax code calls this a “cash or deferred arrangement,” or CODA. A 401k Plan can be combined with other types of plans, such as Defined Benefit and Cash Balance Plans, to maximize tax deductions and allow for multiple forms of plan contributions. The typical 401(k) Plan provides for employer profit sharing contributions, in addition to employee contributions. Self-Directed Solo 401(k) Plans are 401(k) plans for businesses that don’t have full-time employees other than business owners and their spouses, which can be designed to include very attractive features such as Roth 401k Contributions and After-Tax Employee Contributions.What is a Roth Solo 401k Plan?
Continue reading “Solo 401K Roth Contribution Q&A”Self-Directed Solo 401k Common Questions
Mega Backdoor Roth Solo 401k vs. Checkbook IRA
Solo 401K Eligibility: Are Parents and Children Related? Controlled Groups
Beyond Prohibited Transactions: The Plan Asset Rule
The Plan Asset Rule
There’s a lesser known extension of IRC 4975 in the Code of Federal Regulations that discusses something known as the Plan Asset Rule. In a nutshell, the Plan Asset Rule says that when retirement plans own a “significant” share of an entity, all of that entity’s assets are treated as assets of the retirement plans for purposes of the prohibited transaction rules. The implications of this can be staggering; if retirement plans collectively own a significant portion of an entity, all the disqualified persons of all the retirement plan investors are disqualified persons to that entity. Continue reading “Beyond Prohibited Transactions: The Plan Asset Rule”Beyond Prohibited Transactions: The Exclusive Benefit Rule
Among the first concepts introduced to self-directed IRA and Solo 401(k) investors are “prohibited transactions” and “disqualified persons.” While those are certainly key concepts, there several others to be aware of; among those is the “Exclusive Benefit Rule.” Continue reading “Beyond Prohibited Transactions: The Exclusive Benefit Rule”
Beyond Prohibited Transactions: The DOL Interpretive Bulletin
Benefiting from tax-advantaged retirement funds before retirement age would be a beautiful thing, especially for those of that leverage the power of Solo 401(k)s and Checkbook IRAs. But, as that would defeat the intent of those accounts, the Prohibited Transaction Rules of IRC 4975 were created. Although written broadly, the innovative investor can contrive many ways to circumvent those rules.
However, beyond the letter of the law, the IRS has some additional tools at its disposal with which to counter creative strategies. Those include the Step Transaction Doctrine, the Exclusive Benefit Rule, and the Plan Asset Rule. For cases in which those rules may not apply, the IRS has the Department of Labor Interpretive Bulletin ERISA IB 75-2. Continue reading “Beyond Prohibited Transactions: The DOL Interpretive Bulletin”