Solo 401k Plan Closing

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nkaufman
Posts: 36
Joined: Wed Feb 27, 2013 5:42 pm

Solo 401k Plan Closing

Post by nkaufman » Mon Nov 13, 2017 5:54 pm

Hello,

For a sole-prop with no employees, I have 2 solo 401k plans with different companies, one being Vanguard and one another.

I'd like to consolidate everything to one plan and it seems it is preferable to close the one I have with Vanguard. What is the best way to do a trustee-2-trustee transfer of assets (to minimize paperwork) and then terminate the plan with Vanguard?

Thanks,

Spirit Rider
Posts: 6487
Joined: Fri Mar 02, 2007 2:39 pm

Re: Solo 401k Plan Closing

Post by Spirit Rider » Mon Nov 13, 2017 7:12 pm

I would first call the destination plan custodian. Then initiate the transfer which might be required at Vanguard. You have until the last day of the seventh (7th) month after all the funds have been transferred to the destination plan, to terminate the source plan.

You terminate the plan by filing a final Form 5500-EZ with the IRS, regardless if your balance has ever been >= $250K. There are serious penalties for failing to do this in a timely manner.

The two one-participant 401k plan providers should be helpful with this process.

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BolderBoy
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Location: Colorado

Re: Solo 401k Plan Closing

Post by BolderBoy » Tue Nov 14, 2017 1:03 am

Spirit Rider wrote:
Mon Nov 13, 2017 7:12 pm
You terminate the plan by filing a final Form 5500-EZ with the IRS, regardless if your balance has ever been >= $250K. There are serious penalties for failing to do this in a timely manner.
I need to learn something here. All the 5500s I've filed so far have been with the DoL directly (website). Is filing via the IRS also an option?
“Where you stand, depends on where you sit” - Rufus Miles | "Never underestimate one's capacity to overestimate one's abilities"

nkaufman
Posts: 36
Joined: Wed Feb 27, 2013 5:42 pm

Re: Solo 401k Plan Closing

Post by nkaufman » Tue Nov 14, 2017 10:33 am

BolderBoy wrote:
Tue Nov 14, 2017 1:03 am
Spirit Rider wrote:
Mon Nov 13, 2017 7:12 pm
You terminate the plan by filing a final Form 5500-EZ with the IRS, regardless if your balance has ever been >= $250K. There are serious penalties for failing to do this in a timely manner.
I need to learn something here. All the 5500s I've filed so far have been with the DoL directly (website). Is filing via the IRS also an option?
I think poster meant file 5500 with DOL when one terminates the plan.

nkaufman
Posts: 36
Joined: Wed Feb 27, 2013 5:42 pm

Re: Solo 401k Plan Closing

Post by nkaufman » Tue Nov 14, 2017 10:34 am

Is there some other step that needs to be taken while terminating the plan with no employees?

Has anyone actually terminated a plan and moved assets to another plan?

Thanks

MindTheGAAP
Posts: 153
Joined: Fri Jan 31, 2014 12:44 am

Re: Solo 401k Plan Closing

Post by MindTheGAAP » Tue Nov 14, 2017 11:22 am

Here's what I see on this:

One-participant plans cover only a business owner and his or her spouse, or cover only one or more partners or partners and their spouses in a business partnership. Annual returns of one-participant plans can be filed by:
  • electronically using Form 5500-SF with the Department of Labor’s EFAST2 system, if certain conditions are met
  • completing and mailing a paper Form 5500-EZ to IRS.
Hope that helps clarify
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