Rollovers to Solo-K Plan

While many people may not be aware, your Solo-K can receive rollovers from almost any retirement plan. Of course, there are IRS rules that may/will be applicable to you. You want to make sure you follow these easy rollover rules to ensure your rollover is done correctly and the rollover remains a non-taxable event.

While not all retirement plans are listed here, the following retirement plans are some of the more common plans that clients request to have rolled over to their Solo-K and some helpful tips on the rollover of these plans.

Previous Employer’s 401(k)

Doing a rollover from a previous employer’s 401(k) plan is, typically, very different than a rollover of an IRA to your Solo-K. That being said, here are some brief points on what you can expect with this rollover to your Solo-K plan.

  1. Since this is an employer’s plan and you (not someone else) was the former participant, almost all 401(k) plan administrators will require you to execute a form making this request for rollover.
  2. Make sure when you complete the form, you DO NOT request a distribution where you are opting to have a mandatory 20% tax withholding taken out. You will check NO to this. Remember, you will be executing a non-taxable rollover of the funds/assets with any rollover check being made payable to the plan (only).
  3. You will want to direct the administrator that this is a non-taxable rollover, with the 1099-R correctly completed (utilizing Code “G” to represent a non-taxable rollover). I suggest to many clients that they follow-up in January of the year following the rollover to ensure this is being done correctly. There are some administrators who do not do this correctly.
  4. You DO want to make sure you report your non-taxable rollover to the IRS on your 1040 tax return for the year in which the rollover occurred. If not, give the IRS about 2 years, and they will send you a letter asking you if you owe taxes to the IRS. Who wants or needs that stress. Keep in mind, they are receiving the same 1099-R that the 401(k) administrator sends out, and if they do not see a corresponding accounting of this event from you, they default to thinking you may have not executed a non-taxable rollover.

SEP IRA

  1. You will need to work with a new plan document sponsor (e.g, PGI) for your Solo-K as your SEP-IRA document cannot be used for your Solo-K.
  2. When you terminate the SEP-IRA, you can rollover the funds/assets to your Solo-K.
  3. You will want to direct the SEP-IRA document provider (e.g., typically a brokerage firm) that this is a non-taxable rollover, with the 1099-R correctly completed (utilizing Code “G” to represent a non-taxable rollover). You will be executing a non-taxable rollover of the funds/assets with any rollover check being made payable to the plan (only).
  4. You DO want to make sure you report your non-taxable rollover to the IRS on your 1040 tax return for the year in which the rollover occurred.

Traditional IRA

  1. You will request a rollover of your IRA funds/assets to your new Solo-K.
  2. You will want to direct the IRA custodian that this is a non-taxable rollover, with the 1099-R correctly completed (utilizing Code “G” to represent a non-taxable rollover). You will be executing a non-taxable rollover of the funds/assets with any rollover check being made payable to the plan (only).
  3. You DO want to make sure you report your non-taxable rollover to the IRS on your 1040 tax return for the year in which the rollover occurred.

Roth IRA

  1. Roth IRA funds, at present time, may not be rolled over into a 401(k) plan, including a Solo-K. This would even apply to a Solo-K that permits Roth contributions or Roth conversions.