Solo-K – Establishment

Of course, you will be working with a plan document sponsor for the establishment of your Solo-K. And the plan document sponsor should certainly be working with IRS-approved plan documents for your plan.

While your plan document sponsor will/should assist you in most or not all aspects of the plan and account creation, it is always important to remember that you are still the legal Trustee of the plan. For this reason, it is important that you are aware establishment of the steps for establishment of the plan and the account set-up for the plan.

1. Let’s Visit

The best way to start a relationship is talking. Some plan document sponsors, no criticism intended, will invariably provide you the “10-minute elevator pitch” (ok, it might go 15…it’s just a saying!) on how they will assist you. I typically find that this topic is not something that can be easily canvassed in 10 or 15 minutes.

I believe it is important to both PGI and the prospective client to visit so we can confirm what self-directed retirement product (i.e., IRA LLC, IRA Trust, Solo-K, company-sponsored multi-participant 401(k) plan, ROBS plan) is best for them. More importantly, to discuss the “flow” of how the self-directed Solo-K plan plan must be administered by the Trustee (you).

As the saying might go: a well-educated client is a good client!

2. Completion of Solo-K Order Form

When you are ready to commence the plan, you can engage PGI’s services as the plan document sponsor by simply executing the PGI Solo-K order form through DocuSign.

3. IRS SS-4 Form

Your Solo-K plan must have its own EIN. The only purpose of the SS-4 form is for the plan’s Trustee to give authorization to a third-party (e.g., PGI) to secure the EIN on the plan’s behalf. The SS-4 form is not submitted to the IRS; its only purpose is authorization. Sample SS-4.

4. Plan Documents & Trust

PGI will prepare, register and submit to the Trustee of the plan the IRS-approved Solo-K Plan & Trust documents. The Trust Agreement, identifying you as the Trustee, will permit you, as Trustee and fiduciary, to execute all investments on behalf of the Trust.

5. “Host” Account for Solo-K?

As part of our visit, we will talk about the options for the “hosting” of your Solo-K. In short, where will your plan’s account be housed…it can’t be under the proverbial mattress.

Regardless of which host account option you elect, PGI will work with you on what type of plan account(s) you are needing for the successful operation and administration of your plan.

Option #1 — Banks and Credit Unions

Any bank or credit union can open the account, but it does not mean that all will. PGI will assist you with what national banks may be easiest to work with and how best to open the account. If needed, PGI will also assist you in speaking with the bank, if wanted. There are pros and cons to opening the plan’s “host” account at a bank or credit union. Bottom line: if one bank or credit union does not open the account, “walk down the block” to the next bank or credit union! You will be able to open the account.

Option #2 — Brokerage Firms

PGI has relationships with nationally-known brokerage firms including Schwab, Fidelity, TD Ameritrade, E*Trade and Capital One. In short, you are able to open your Solo-K account with one of these firms and PGI will complete the application paperwork for you. Sample brokerage firm application forms.

The obvious reason why someone would choose the brokerage option over a bank is this account will still provide you checkbook/wire control over your Solo-K assets, but also the ability, if you wanted, to purchase “traditional” assets from the firm. The use of a brokerage firm can be popular for those individuals who want one account where they can invest both traditionally and non-traditionally. Also, many people, when between non-traditional investments, want to have options on keeping the money “active” vs. keeping the funds in a money market savings account at a bank or credit union.

Option #3 — Bank/Credit Union and Brokerage Account

You can have the plan’s account opened at multiple (usually two (2)) institutions. Remember, you are not opening up two Solo-Ks, rather than Solo-K is simply opening up two accounts at financial institutions. Of course, each account is opened and under the title and EIN of the Solo-K.

6. Funding your Solo-K

Obviously, the purpose of the Solo-K will be to make contributions and grow your retirement account in a Pre-Tax or Roth manner. You can also make rollover contributions or, more simply stated, rollover funds from other eligible plans (e.g., non-Roth IRA, old 401(k)).

PGI can assist you in facilitating the rollover of the funds into the plan and the proper reporting of the rollover on your 1040 tax return for the year in which the rollover occurred.