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Books on setting up a 401k-solo and managing it

Posted: Wed Oct 11, 2017 8:23 pm
by jackal
Can someone recommend some good books that talk about:
1. How a physician and spouse can set up a solo 401k on their own at a custodian.
2. How the practice should be structured for tax purposes. (Pllc taxed as an s-Corp or something else?) and how such a corporation/llc can set up a solo 401k.
3. Ongoing due deligence needed.

Basically trying to find the best way to:
1. Contribute 18k either pre tax or Roth in any given year.
2. Considering one of the two and would want to learn how to set up the plan with either option.
A. Employer contributes 36k.
B. I contribute a VAT amount of 36k(voluntary after tax amount)
If I choose B, I know I can roll into into a Roth IRA right away. Can I roll it into a Roth 401k?
Thank you!

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 7:52 am
by jackal
Bumping the post to see if anyone knows the answer or at least know where I could find the answer. Thank you!

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 8:04 am
by docbrown
Last I checked, Ascensus will charge you about $200 per year (could be higher now) to manage the documents related to your self-administered 401k.

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 8:23 am
by aristotelian
Have you looked on the Vanguard or other brokers' small business website? I would guess they would have a white paper laying out the options and basics.

I have not heard of doing the "voluntary after tax" contribution with solo 401k. With a regular 401k, you are only allowed to do that up to $54k if the employer is not making a full match (e.g. I contribute $18k, employer does matching $9k, then I contribute $27k after tax). Since you are doing your own full employer match, I don't think you can then do another $36k to go megabackdoor on top of the max deductible contribution. That would be awesome if you could, though.

As someone who is obviously high income, it might be worth your while to talk with a CPA or fee only CFP.

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 9:27 am
by pkcrafter

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 9:31 am
by jackal
Thank you the information! You guys rock!!

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 9:39 am
by JBTX
I have Vanguard solo 401k. It has both traditional and Roth options. There is really not much to administer. They can walk you through set up. However apparently it isn’t structured for additional family member contributors while other plans may be. Hopefully Spirit Rider will chime in. He seems to be very knowledgeable on these.

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 9:43 am
by djpeteski
I just got off the phone with Fidelity. It sounds like you would be better off with a Vanguard if you are interested in the Roth option.

Fidelity offers no fees, and administration. The full trading portfolio is available so you can own individual stocks or any fund otherwise available through trading. Fidelity does not offer a Roth option but does offer roll in.

Having a roll in is nice if you intend to do a back door Roth.

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 4:24 pm
by Duckie
jackal wrote:A. Employer contributes 36k.
B. I contribute a VAT amount of 36k(voluntary after tax amount)
If I choose B, I know I can roll into into a Roth IRA right away. Can I roll it into a Roth 401k?
tfb has a solo 401k administered through Ascensus with assets held at Fidelity and here's how he does it: In his solo 401k he rolls his after-tax contributions to a Roth IRA, but maybe you can set up the plan to allow in-plan rollover/conversions. If you can then you should be able to roll the after-tax sub-account assets into the Roth sub-account. You'd have to use a custodian that has the solo Roth 401k option. Fidelity does not. Vanguard does but they have an issue with rollovers. (I'm not sure an in-plan rollover has the same issue.) I think TD Ameritrade has the Roth option and allows rollovers.

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 6:11 pm
by Spirit Rider
To cover one of the other issues your raised.
jackal wrote:
Wed Oct 11, 2017 8:23 pm
2. How the practice should be structured for tax purposes. (Pllc taxed as an s-Corp or something else?) and how such a corporation/llc can set up a solo 401k.
Any owner-only business entity type can adopt a one-participant 401k.

The business entity type decision can be rather complex. Don't be driven by the so-called conventional wisdom. Many times it is anything but wise.

There will be many factors:
  1. Is your spouse also a physician or going to provide support.
  2. What will your total net income be.
  3. What state will this be in.
  4. Is the income all from professional services (note: you can not have eligible full time employees other than your spouse)
  5. many more
There is this belief that an S-Corp is always better for higher income earners. This is not always true. There is also this belief that an LLC always provides the best liability protection. This is seldom true for someone providing professional services. A sole proprietor is not always to be discounted, especially when a spouse is involved. There is something called a "qualified joint venture" option to a sole proprietor, that provides many benefits.

Do your due diligence with any accounting or legal advice. You should make sure they provide supporting evidence for any business entity recommendation. It needs to provide real financial and other benefits.

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 9:45 pm
by avalpert
Duckie wrote:
Thu Oct 12, 2017 4:24 pm
jackal wrote:A. Employer contributes 36k.
B. I contribute a VAT amount of 36k(voluntary after tax amount)
If I choose B, I know I can roll into into a Roth IRA right away. Can I roll it into a Roth 401k?
tfb has a solo 401k administered through Ascensus with assets held at Fidelity and here's how he does it: In his solo 401k he rolls his after-tax contributions to a Roth IRA, but maybe you can set up the plan to allow in-plan rollover/conversions. If you can then you should be able to roll the after-tax sub-account assets into the Roth sub-account. You'd have to use a custodian that has the solo Roth 401k option. Fidelity does not. Vanguard does but they have an issue with rollovers. (I'm not sure an in-plan rollover has the same issue.) I think TD Ameritrade has the Roth option and allows rollovers.
This is what I do. If you set up the plan yourself the it doesn't matter whether the brokerage you use allows Roth option sub-accounts in their in-house 401k since you won't be using that - you will be setting up a tax-exempt trust account(s) on behalf of the 401k for which you are the trustee. It is on you to keep detailed records of contributions to each account and conversions (if you do that).

For what it is worth I have my accounts at TD Ameritrade but you could certainly do it with Fidelity.

Re: Books on setting up a 401k-solo and managing it

Posted: Thu Oct 12, 2017 10:00 pm
by DavidRoseMountain
avalpert wrote:
Thu Oct 12, 2017 9:45 pm
Duckie wrote:
Thu Oct 12, 2017 4:24 pm
jackal wrote:A. Employer contributes 36k.
B. I contribute a VAT amount of 36k(voluntary after tax amount)
If I choose B, I know I can roll into into a Roth IRA right away. Can I roll it into a Roth 401k?
tfb has a solo 401k administered through Ascensus with assets held at Fidelity and here's how he does it: In his solo 401k he rolls his after-tax contributions to a Roth IRA, but maybe you can set up the plan to allow in-plan rollover/conversions. If you can then you should be able to roll the after-tax sub-account assets into the Roth sub-account. You'd have to use a custodian that has the solo Roth 401k option. Fidelity does not. Vanguard does but they have an issue with rollovers. (I'm not sure an in-plan rollover has the same issue.) I think TD Ameritrade has the Roth option and allows rollovers.
This is what I do. If you set up the plan yourself the it doesn't matter whether the brokerage you use allows Roth option sub-accounts in their in-house 401k since you won't be using that - you will be setting up a tax-exempt trust account(s) on behalf of the 401k for which you are the trustee. It is on you to keep detailed records of contributions to each account and conversions (if you do that).

For what it is worth I have my accounts at TD Ameritrade but you could certainly do it with Fidelity.
+1
I use discountsolo401k, and I have 3 sub accounts in the Fidelity non-prototype investment accounts. One is the pre-tax ( the employee and employer contributions), one is the after-tax, and then there is the 401k roth subaccount. Fidelity doesn't care what you call these accounts. your third party provider of plan documents is a restatement of the fidelity solo 401k plan, and these documents are what allow you to make these tax-deferred, or after tax contributions with in-service roll overs.
An excel spreadsheet is where I can keep track of all the contributions, along with a statement about what my contributions will be.

Re: Books on setting up a 401k-solo and managing it

Posted: Fri Oct 13, 2017 1:06 pm
by simas
I also use dicountsolo401k and have Fidelity non-prototype investment accounts, same set up with 3 of them. Considering whether it makes sense to open a forth one to track pre-tax contributions separate from rollovers from other plans


Strong recommendation for discontsolo 401k , Justin Windham is very knowledgeable , responsive, and patient.

Re: Books on setting up a 401k-solo and managing it

Posted: Fri Oct 13, 2017 2:43 pm
by jackal
Man the information on site beats anything else out there!
Thank you for all your help!

A couple of other questions:
1. Does a solo 401k offer the same level of asset protection as a regular 401k?
2. Can I contribute 36k to the VAT portion of a plan and then immediately roll it over into the ROTH 401k portion with no other concerns?
3. Can I rollover non 401k (say a t-IRA or ROTH IRA assets) into a 401k plan? Would the commingling of assets negate the asset protection benefits of a 401k?
4. Do I need to hire a record-keeper for this purpose?

Any other questions I should be asking?

Thank you for your help.

Re: Books on setting up a 401k-solo and managing it

Posted: Fri Oct 13, 2017 4:37 pm
by Spirit Rider
jackal wrote:
Fri Oct 13, 2017 2:43 pm
Man the information on site beats anything else out there!
Thank you for all your help!

A couple of other questions:
1. Does a solo 401k offer the same level of asset protection as a regular 401k?
2. Can I contribute 36k to the VAT portion of a plan and then immediately roll it over into the ROTH 401k portion with no other concerns?
3. Can I rollover non 401k (say a t-IRA or ROTH IRA assets) into a 401k plan? Would the commingling of assets negate the asset protection benefits of a 401k?
4. Do I need to hire a record-keeper for this purpose?

Any other questions I should be asking?
  1. No, any owner-employee only retirement plan is not considered an ERISA plan for purposes of the anti-alienation provisions. It does have unlimited federal bankruptcy protection. However, creditor protection is subject to state law and unfortunately in some states it falls through the cracks. The laws tend to specifically protect ERISA plans, non-ERISA governmental plans, tax-exempt plans and IRAs. Some states do specifically or by wording extend protection to these plans, but in other states these plans do not get the state creditor protections extended to them.
  2. As far as I know.
  3. You can roll pre-tax traditional RA assets to a 401k. It is prohibited to roll non-deductible traditional IRA assets into a 401k. You can never roll a Roth IRA to any plan other than another Roth IRA. There is not any concept of co-mingling for asset protection in a 401k plan for asset protection. You will need to keep track of the source and type of the of the assets. For example, the IRS prohibits the withdrawal/rollover of employee deferrals prior to age 59 1/2. The plan document can allow other assets to be rolled over. If the plan so designates, previously rolled in assets, vested employer contributions (all one-participant plan deferrals/contributions are immediately vested) and employee after-tax contributions can be withdrawn/rolled over prior to age 59 1/2. All of the asset types include their earnings. Except for employee-after tax contributions, all other asset type earnings have the same tax status as the contribution. Note: This is very important, in order to do the Mega Backdoor Roth, you must have a separate sub account for the after-tax contributions and earnings. You also need to have a separate pre-tax sub account and if you want to do Roth 401k employee deferrals or In-plan Roth Rollovers (IRR), you must have a separate Roth designated sub account.
  4. It is not required. When you roll your own custom plan. It is up to you to determine which of the services provided by a turn key mainstream provider, you want to do yourself and those you wist to pay someone else to do.