Single K (Solo 401k) Question

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Topic Author
gemdy
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Joined: Wed Jul 08, 2015 1:06 pm

Single K (Solo 401k) Question

Post by gemdy »

I have a tricky situation:

I have a Small Business (myself and business partner). We have 1 employee (my fiance) and we are getting married in November. I'd like to set up a Single K now and rollover my current SEP $. I need to borrow against it as I have a lot in there.

Would this be ok to do now? At the end of the year we will be married, but right now we are not. How will the IRS view this?
niceguy7376
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Re: Single K (Solo 401k) Question

Post by niceguy7376 »

If you have a partner that is not a spouse, i dont think you can open a solo 401k.
Spirit Rider
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Re: Single K (Solo 401k) Question

Post by Spirit Rider »

Partnerships are eligible for Solo 401k plans. They should be better known as owner-only 401k plans, but it not is quite as catchy a name.
terran
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Re: Single K (Solo 401k) Question

Post by terran »

niceguy7376 wrote:If you have a partner that is not a spouse, i dont think you can open a solo 401k.
Vanguard and the wiki (http://www.bogleheads.org/wiki/Solo_401(k)_plan) seem to indicate that partnerships are ok as long as there are no non-spouse, non-partner employees. Basically everyone is an owner or a spouse of an owner.

I think I would just keep contributing to the SEP this year then start fresh next year once you're married. Make sure you open a solo 401k with Fidelity or one of the other institutions that allows incoming rollovers (not vanguard) if you want to rollover the SEP.
Spirit Rider
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Re: Single K (Solo 401k) Question

Post by Spirit Rider »

If the finance was hired after 1/1 of this year, there may be a way to open a Solo 401k and be in compliance.

Open the Solo 401k specifying a 1/1/2015 effective date on the adoption agreement. On the adoption agreement also specify that the partners were eligible on adoption and future employees become eligible on after one year. The fiancé would become your wife before the one year has elapsed and the Solo 401k would remain compliant.

I'm not 100% sure that this is possible, but if your fiancé was hired after 1/1/2015, it might be an option to investigate. Otherwise, I think you are out of luck.
Topic Author
gemdy
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Joined: Wed Jul 08, 2015 1:06 pm

Re: Single K (Solo 401k) Question

Post by gemdy »

She was hired last year...
What if we made her a partner and removed her from payroll. Then she is paid as an owner via disbursements. Can a 3 owner company get a Single K?
ERISA Stone
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Re: Single K (Solo 401k) Question

Post by ERISA Stone »

What date was she hired?
PhillyBird
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Re: Single K (Solo 401k) Question

Post by PhillyBird »

terran wrote:Make sure you open a solo 401k with Fidelity or one of the other institutions that allows incoming rollovers (not vanguard) if you want to rollover the SEP.
Wait...Vanguard does not allow SEP rollovers into an individual 401k? I was just about to set up i401k with Vanguard with the sole purpose of rolling over SEP IRA funds into it before I do backdoor Roth conversion of my non deductible IRA.
terran
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Re: Single K (Solo 401k) Question

Post by terran »

PhillyBird wrote:
terran wrote:Make sure you open a solo 401k with Fidelity or one of the other institutions that allows incoming rollovers (not vanguard) if you want to rollover the SEP.
Wait...Vanguard does not allow SEP rollovers into an individual 401k? I was just about to set up i401k with Vanguard with the sole purpose of rolling over SEP IRA funds into it before I do backdoor Roth conversion of my non deductible IRA.
Double check, but I'm pretty sure they don't. I know they don't allow rollovers of regular traditional IRAs.
PhillyBird
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Re: Single K (Solo 401k) Question

Post by PhillyBird »

terran wrote:
PhillyBird wrote:
terran wrote:Make sure you open a solo 401k with Fidelity or one of the other institutions that allows incoming rollovers (not vanguard) if you want to rollover the SEP.
Wait...Vanguard does not allow SEP rollovers into an individual 401k? I was just about to set up i401k with Vanguard with the sole purpose of rolling over SEP IRA funds into it before I do backdoor Roth conversion of my non deductible IRA.
Double check, but I'm pretty sure they don't. I know they don't allow rollovers of regular traditional IRAs.
I just called them...you're right I cannot rollover existing SEP IRA funds into Vanguard i401k. That's a bummer as I really like the
vanguard funds. But now I will have to seek out other firms that will let me do this.

Thanks for the info.
Topic Author
gemdy
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Joined: Wed Jul 08, 2015 1:06 pm

Re: Single K (Solo 401k) Question

Post by gemdy »

What if we made her a partner and removed her from payroll. Then she is paid as an owner via disbursements. Can a 3 owner company get a Single K?
Spirit Rider
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Re: Single K (Solo 401k) Question

Post by Spirit Rider »

gemdy wrote:What if we made her a partner and removed her from payroll. Then she is paid as an owner via disbursements. Can a 3 owner company get a Single K?
Yes, you can have more than two partners. However, to qualify for Solo 401k contributions, a partner must have a minimum of 10% interest in the partnership.
DebiT
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Re: Single K (Solo 401k) Question

Post by DebiT »

I don't know anything about the partnership question, but I can tell you that at Schwab I was able to roll over my SEP into my 401K. Definitely made my record keeping simpler.
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
terran
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Re: Single K (Solo 401k) Question

Post by terran »

PhillyBird wrote:
terran wrote:
PhillyBird wrote:
terran wrote:Make sure you open a solo 401k with Fidelity or one of the other institutions that allows incoming rollovers (not vanguard) if you want to rollover the SEP.
Wait...Vanguard does not allow SEP rollovers into an individual 401k? I was just about to set up i401k with Vanguard with the sole purpose of rolling over SEP IRA funds into it before I do backdoor Roth conversion of my non deductible IRA.
Double check, but I'm pretty sure they don't. I know they don't allow rollovers of regular traditional IRAs.
I just called them...you're right I cannot rollover existing SEP IRA funds into Vanguard i401k. That's a bummer as I really like the
vanguard funds. But now I will have to seek out other firms that will let me do this.

Thanks for the info.
Fidelity allows incoming rollovers and has very similar options to vanguard.
Saving$
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Re: Single K (Solo 401k) Question

Post by Saving$ »

OP - I don't know the answer to this, but for the others, since the OP is getting married in November, why can't the OP just open the solo 401k in early December? At that point there will only be owners or spouses of owners working there.

OP - another option may be to lay off the fiancee and hire her back as a 1099 contractor. Then you have no employees.
terran
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Re: Single K (Solo 401k) Question

Post by terran »

Saving$ wrote:OP - I don't know the answer to this, but for the others, since the OP is getting married in November, why can't the OP just open the solo 401k in early December? At that point there will only be owners or spouses of owners working there.
You can only make contributions based on earnings during the time the plan is open, hence the recommendation to make the effective date the 1st of the year in which you open the plan.
Saving$ wrote: OP - another option may be to lay off the fiancee and hire her back as a 1099 contractor. Then you have no employees.
You can't just make someone a contractor. There are specific rules around independence in scheduling and how the work is completed.
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tfb
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Re: Single K (Solo 401k) Question

Post by tfb »

terran wrote:Fidelity allows incoming rollovers and has very similar options to vanguard.
Neither offers the loan feature the OP was looking for.
gemdy wrote: I'd like to set up a Single K now and rollover my current SEP $. I need to borrow against it as I have a lot in there.
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