Rollover ANY Funds into Your Self-Adminstered 401K?!

Well, almost. While I have spoken about this before, it is interesting how I continue to receive questions related to what types (e.g., Traditional IRA, SEP-IRA, 457) of retirement funds CAN be rolled over into a self-administered 401K plan. I don’t mind….I don’t expect people to necessarily know this information and, as a result, some people believe that they can only transfer an IRA to an IRA and a 401K to a 401K, etc. But, is it true….of course not.

But, who cares what I say. What does the IRS say? And, by the way, it doesn’t matter if your 401K is self-administered or not…the IRS doesn’t differentiate between what some people may refer to as “a normal 401K” and one that is self-administered with an appointed 401K trustee.

Just as importantly as what can be rolled over INTO a 401K plan…which is about everything….we should equally address what CANNOT be rolled over into a 401K plan. Generally speaking (as there are some exceptions), the only funds that specifically cannot be rolled over into a 401K plan is Roth IRA funds. Now, even though Roth IRA funds cannot be rolled over into a 401K, one can convert funds rolled over into a 401K plan INTO Roth funds. Further, you can make 401K Roth contributions into the plan. Yes, you understood that correctly. You can execute Roth conversions within the 401K, you can make Roth contributions. You just cannot rollover a Roth IRA into the 401K.

Okay, before you get too excited, remember you must QUALIFY for the 401K. As appealing as it may sound to establish a 401K plan, you must have an active business that sponsors the 401K plan. While you can do this as a sole proprietor, or an LLC, S-Corp or C-Corp, you must have a business. Further, you need to understand that the rules and regulations governing an individual 401K plan vs. a 401K plan with employees are quite different with administration and reporting requirements. For now, we are only talking about an individual plan where there are no employees/participants other than the individual and, possibly, their spouse.

If you want to watch a video on this topic that may go into a bit more detail, please feel free to watch the attached video

As always, the information provided is for educational purposes and is not intended nor should it be interpreted as, any type of tax, legal, financial or investment advice. You must always consult your respective professional for such assistance.