Solo 401k w/ Change in Type of Work

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wertdaman
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Joined: Fri May 01, 2015 11:17 am

Solo 401k w/ Change in Type of Work

Post by wertdaman » Sat Dec 09, 2017 12:56 am

I haven't got around to trying Fidelity's support line, but was curious if anyone here had thoughts or experience. My wife started assistant teaching part time two years as a self employed contractor. We got an EIN and setup a self employed 401k at Fidelity. This year, in addition to teaching, she has started doing direct sales and gets paid commission as a contractor. Does she require a separate EIN and SE 401k account to contribute earnings for this work? Or is the existing EIN/SE 401k okay to use for both?

Thanks!

Spirit Rider
Posts: 7844
Joined: Fri Mar 02, 2007 2:39 pm

Re: Solo 401k w/ Change in Type of Work

Post by Spirit Rider » Sat Dec 09, 2017 10:07 am

She does not need nor does the IRS want her to get another EIN. If she is using the same business name, e.g. her name, she does not need to change anything.

If she is using a different business name, she can simply add the "affiliated employer" to Fidleity's Self-Employed 401k. This is done by amending the plan and adding the additional employer in Section 2B of Fidleity's Self-Employed 401(k) Adoption Agreement.

Note: All businesses owned >= 80% are part of a controlled group and considered an "affiliated employer" for employer retirement plan purposes.

She could if she wanted to, have separate businesses and separate one-participant 401k plans. They would have separate net self-employment earnings and contributions, but they would be subject to one employee deferral limit and one combined annual addition limit. So, I'm not sure why you would ever want to.

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neurosphere
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Re: Solo 401k w/ Change in Type of Work

Post by neurosphere » Sat Dec 09, 2017 10:57 am

I just recently did something similar, also after asking for opinions on this board, and with lots of help from Spirit Rider. I talked with Fidelity and they helped me file a plan amendment, it's very easy (essentially you just send the same adoption paperwork with a new check box). My two businesses each have a different EIN, which is different from my SS#. In my case, one is an LLC while the other one is not (which is why I think I needed a new EIN...whether it was necessary for me to have an LLC in the first place is up for debate).

If you have two business names, proceed as per Spirit Rider (but work with Fidelity on this too).

You use the form titled "Fidelity Retirement Plan — Self-Employed 401(k) Adoption Agreement Instructions" as noted by Spirit Rider. Section 2A is the existing/original employer, and then in 2B they had me just list the name of the new/additional employer. Just the name e.g. "my firm, LLC" and nothing else (e.g. no address, EIN or anything). Note I did not remember how I had originally filled out sections 3 and 4 (and was too lazy to find the original paperwork). But you can re-evaluate the options in sections 3/4 and if different than originally filed, those will be amended also.

Here is the text of a cover letter I included with the forms:
Dear Fidelity,
Attached is an adoption agreement for an existing Self-Employed 401(k), intended to be an AMENDMENT to the existing plan. The plan name is [my plan name], #001.
This amendment is intended to update the plan to include the existence of an affiliated employer as shown in section 2.

wertdaman
Posts: 9
Joined: Fri May 01, 2015 11:17 am

Re: Solo 401k w/ Change in Type of Work

Post by wertdaman » Sat Dec 09, 2017 5:31 pm

Thank you both for the feedback and especially Spirit Rider for the clear information on this!

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