Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

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Topic Author
jt4
Posts: 40
Joined: Wed Feb 06, 2019 5:13 pm

Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jt4 » Thu Oct 17, 2019 4:22 pm

Hi Bogleheads,

In a recent post, I asked if anyone used Solo401k.com (i.e. the Nabers Group) for their self-directed solo 401k. Only one person (@Peter12) had used Solo401k.com. SO, I wanted to broaden my search to other popular self-directed 401K plan providers: MySolo401k.com and DiscountSolo401k.com.

Has anyone used any of these providers?

MySolo401k.com
$550 setup fee
$125/yr plan maintenance fee (waived for the first year)
A+ BBB rating, 103 5-star reviews, 2 4-star reviews


DiscountSolo401k.com
$575 setup fee
$100/yr plan maintenance fee
A+ BBB rating, 14 5-star reviews


Solo401k.com
$400 setup fee
$100/yr plan maintenance fee
A+ BBB rating, 5 5-star reviews


I'd greatly appreciate any feedback and reviews of these services.

____________
Background
I'm looking to set up a self-directed solo 401k for my self-employment income. The reason why I'm seeking to use a self-directed plan is so that I can make after-tax voluntary contributions (these are different than Roth) up to a minimum of either $56K (for 2019, under 50) or my net self-employment income. The after-tax voluntary contributions allow for implementation of the Mega Backdoor Roth IRA strategy, allowing you to increase your tax-advantaged space.

User avatar
JamesSFO
Posts: 3217
Joined: Thu Apr 26, 2012 10:16 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by JamesSFO » Thu Oct 17, 2019 4:27 pm

Vanguard has a basically $0 solo401K (no rollovers in allowed, but both roth traditional).

Fidelity I think also has a $0 one that accepts rollovers but last I recall didn't do roth

Why not use one of those two? Or Schwab's offering?

Topic Author
jt4
Posts: 40
Joined: Wed Feb 06, 2019 5:13 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jt4 » Thu Oct 17, 2019 4:39 pm

Hi James,

The standard plans Solo 401k plans offered at Fidelity, Schwab, Vanguard, etc. don't allow for voluntary after-tax contributions, which cap your yearly contributions to $19K (2019, under 50).

Self-directed solo 401k plans can allow after-tax contributions beyond the $19K cap for a total contribution (pre-tax and after-tax) of up to $56K/yr (2019, under 50). The after-tax contributions can then be rolled over into a Roth account in a strategy known as the Mega Backdoor Roth IRA. The reason this is appealing is because the technique allows you to increase your tax-advantaged space.

User avatar
JamesSFO
Posts: 3217
Joined: Thu Apr 26, 2012 10:16 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by JamesSFO » Thu Oct 17, 2019 6:21 pm

Sure! Very familiar with that, didn't have the context that a mega-backdoor was a key feature for you.

One point though, EMPLOYEE contributions are $19K capped, but you can make an EMPLOYER contribution into any of the other plans that can bring the total to the $56K limit depending on your business income which means unless the Roth aspect is key to you it might be a wash. YMMV

simas
Posts: 463
Joined: Wed Apr 04, 2007 5:50 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by simas » Thu Oct 17, 2019 9:07 pm

jt4 wrote:
Thu Oct 17, 2019 4:22 pm

DiscountSolo401k.com
$575 setup fee
$100/yr plan maintenance fee
____________
Background
I'm looking to set up a self-directed solo 401k for my self-employment income. The reason why I'm seeking to use a self-directed plan is so that I can make after-tax voluntary contributions (these are different than Roth) up to a minimum of either $56K (for 2019, under 50) or my net self-employment income. The after-tax voluntary contributions allow for implementation of the Mega Backdoor Roth IRA strategy, allowing you to increase your tax-advantaged space.
I used discountsolo401k and am pretty happy with them ( 4th year now). responsive customer service, zero cross sell /upsell, no product pitches, just doing what it claims to do.

rama13
Posts: 33
Joined: Sun May 15, 2011 2:09 am

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by rama13 » Fri Oct 18, 2019 6:57 pm

mysolo401k.net for me. They have a ton of information on their website, and they also do 1099-R and 5500 submissions.

jacoavlu
Posts: 759
Joined: Sun Jan 06, 2013 12:06 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jacoavlu » Fri Oct 18, 2019 7:26 pm

^^^ at one point they had a contribution calculator on their site and it was wrong. Or at least wrong some of the time.

You have to use The Finance Buffs spreadsheet to verify your calculations.

worthit
Posts: 132
Joined: Tue Jun 19, 2018 2:10 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by worthit » Sat Oct 19, 2019 5:00 am

simas wrote:
Thu Oct 17, 2019 9:07 pm
jt4 wrote:
Thu Oct 17, 2019 4:22 pm

DiscountSolo401k.com
$575 setup fee
$100/yr plan maintenance fee
____________
Background
I'm looking to set up a self-directed solo 401k for my self-employment income. The reason why I'm seeking to use a self-directed plan is so that I can make after-tax voluntary contributions (these are different than Roth) up to a minimum of either $56K (for 2019, under 50) or my net self-employment income. The after-tax voluntary contributions allow for implementation of the Mega Backdoor Roth IRA strategy, allowing you to increase your tax-advantaged space.
I used discountsolo401k and am pretty happy with them ( 4th year now). responsive customer service, zero cross sell /upsell, no product pitches, just doing what it claims to do.
+1 discountsolo401k here.

EnjoyIt
Posts: 2854
Joined: Sun Dec 29, 2013 8:06 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Sat Oct 19, 2019 7:36 am

Where do you all keep the money? Is it at one of these firms or can you keep the cash at Vanguard/fidelity/etc?

I am looking to set the same thing up for myself this year.

Spirit Rider
Posts: 11870
Joined: Fri Mar 02, 2007 2:39 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Spirit Rider » Sat Oct 19, 2019 8:40 am

Vanguard is the worst choice for a custodian of a custom one-participant 401k plan.

They only offer a single pooled account that you must separately account for any pre-tax, Roth or employee after-tax asset contributions and earnings. Fidelity and the other low-cost brokerage options offer separate accounts to ease the record keeping burden.

Remember, if you set up one of these you are responsible for all 401k trustee, record keeping, reporting, administration and compliance.

As I like to remind people. A one-participant 401k plan is still a complex 401k plan. Subject to almost ALL of the relevant tax code, IRS regulations, guidance and publications.

I always recommended that someone amending to a custom one-participant 401k plan, use a professional TPA. Most people ignore that advice even though they don't know what they don't know.

I'm betting the majority make plan errors within two years. The only saving grace is that these are still too new and one-participant 401k plans are not an audit priority for the IRS.

EnjoyIt
Posts: 2854
Joined: Sun Dec 29, 2013 8:06 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Sat Oct 19, 2019 10:50 am

Spirit Rider wrote:
Sat Oct 19, 2019 8:40 am
Vanguard is the worst choice for a custodian of a custom one-participant 401k plan.

They only offer a single pooled account that you must separately account for any pre-tax, Roth or employee after-tax asset contributions and earnings. Fidelity and the other low-cost brokerage options offer separate accounts to ease the record keeping burden.

Remember, if you set up one of these you are responsible for all 401k trustee, record keeping, reporting, administration and compliance.

As I like to remind people. A one-participant 401k plan is still a complex 401k plan. Subject to almost ALL of the relevant tax code, IRS regulations, guidance and publications.

I always recommended that someone amending to a custom one-participant 401k plan, use a professional TPA. Most people ignore that advice even though they don't know what they don't know.

I'm betting the majority make plan errors within two years. The only saving grace is that these are still too new and one-participant 401k plans are not an audit priority for the IRS.
May I ask, what exactly does a TPA offer that these online companies do not?

Luckywon
Posts: 544
Joined: Tue Mar 28, 2017 10:33 am

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Luckywon » Sat Oct 19, 2019 11:32 am

EnjoyIt wrote:
Sat Oct 19, 2019 10:50 am
Spirit Rider wrote:
Sat Oct 19, 2019 8:40 am
Vanguard is the worst choice for a custodian of a custom one-participant 401k plan.

They only offer a single pooled account that you must separately account for any pre-tax, Roth or employee after-tax asset contributions and earnings. Fidelity and the other low-cost brokerage options offer separate accounts to ease the record keeping burden.

Remember, if you set up one of these you are responsible for all 401k trustee, record keeping, reporting, administration and compliance.

As I like to remind people. A one-participant 401k plan is still a complex 401k plan. Subject to almost ALL of the relevant tax code, IRS regulations, guidance and publications.

I always recommended that someone amending to a custom one-participant 401k plan, use a professional TPA. Most people ignore that advice even though they don't know what they don't know.

I'm betting the majority make plan errors within two years. The only saving grace is that these are still too new and one-participant 401k plans are not an audit priority for the IRS.
May I ask, what exactly does a TPA offer that these online companies do not?
The online companies referenced in this thread are TPA's. I believe Spirit Rider is stating that someone amending to a custom one-participant 401k plan use a professional TPA, such as an online (or other) company.

Cyanide123
Posts: 195
Joined: Sun May 05, 2019 9:14 am

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Cyanide123 » Sat Oct 19, 2019 11:47 am

jt4 wrote:
Thu Oct 17, 2019 4:39 pm
Hi James,

The standard plans Solo 401k plans offered at Fidelity, Schwab, Vanguard, etc. don't allow for voluntary after-tax contributions, which cap your yearly contributions to $19K (2019, under 50).

Self-directed solo 401k plans can allow after-tax contributions beyond the $19K cap for a total contribution (pre-tax and after-tax) of up to $56K/yr (2019, under 50). The after-tax contributions can then be rolled over into a Roth account in a strategy known as the Mega Backdoor Roth IRA. The reason this is appealing is because the technique allows you to increase your tax-advantaged space.
I'm pretty sure you can put 56k into the solo 401k with vanguard, Fidelity, schwab, etrade, ameritrade etc.

19k as employee contribution and the rest as employer contribution

Cyanide123
Posts: 195
Joined: Sun May 05, 2019 9:14 am

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Cyanide123 » Sat Oct 19, 2019 11:51 am

So what's the benefit of using one of these websites over using etrade? What extra features are you buying that one of the free accounts won't get you?

EnjoyIt
Posts: 2854
Joined: Sun Dec 29, 2013 8:06 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Sat Oct 19, 2019 11:58 am

Cyanide123 wrote:
Sat Oct 19, 2019 11:51 am
So what's the benefit of using one of these websites over using etrade? What extra features are you buying that one of the free accounts won't get you?
The ability to do after tax contributions. As an example, if a sole proprietor qualifies for trump's 199A deduction, they will get 20% tax deduction. If the same person is in the 22% or 24% tax bracket, it may be worthwhile to forgo pre-tax contributions and instead do after tax contributions. This becomes very advantageous if that person expects to be in the 10% or higher tax bracket in retirement.

Basically pay 2%-4% <5% in extra now and save 10% or higher in taxes in retirement.
Decreasing pre-tax investments so RMDs will be smaller
tax diversification.

Edit: I had a math mistake which I corrected. Here is an example:

Someone who is in the 24% tax bracket who makes an additional self employed $100 with only $25 of 401k space left:

Option #1: Save 25% or $25 as an employer portion of the 401k. Of the $75, 20% will be tax deductible due to QBI so this person will pay $60 * 24% = $14.40 in taxes and have $25 in a 401k that will need to have taxes paid for in the future.
vs.
Option #2: Take the $100 as profit of which 20% will be deducted due to QBI, therefor this person will pay $80 * 24% = $19.20 in taxes and then place $25 in an after tax 401k and convert it to a Roth.

This person will be paying an extra $19.20 - $14.40 = $4.80 in taxes or and extra 4.8% in taxes on the $100 profit but will be able to pull the $25 out tax free in the future because it is Roth money.
Last edited by EnjoyIt on Sat Oct 19, 2019 2:42 pm, edited 2 times in total.

EnjoyIt
Posts: 2854
Joined: Sun Dec 29, 2013 8:06 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Sat Oct 19, 2019 12:00 pm

Luckywon wrote:
Sat Oct 19, 2019 11:32 am
EnjoyIt wrote:
Sat Oct 19, 2019 10:50 am
Spirit Rider wrote:
Sat Oct 19, 2019 8:40 am
Vanguard is the worst choice for a custodian of a custom one-participant 401k plan.

They only offer a single pooled account that you must separately account for any pre-tax, Roth or employee after-tax asset contributions and earnings. Fidelity and the other low-cost brokerage options offer separate accounts to ease the record keeping burden.

Remember, if you set up one of these you are responsible for all 401k trustee, record keeping, reporting, administration and compliance.

As I like to remind people. A one-participant 401k plan is still a complex 401k plan. Subject to almost ALL of the relevant tax code, IRS regulations, guidance and publications.

I always recommended that someone amending to a custom one-participant 401k plan, use a professional TPA. Most people ignore that advice even though they don't know what they don't know.

I'm betting the majority make plan errors within two years. The only saving grace is that these are still too new and one-participant 401k plans are not an audit priority for the IRS.
May I ask, what exactly does a TPA offer that these online companies do not?
The online companies referenced in this thread are TPA's. I believe Spirit Rider is stating that someone amending to a custom one-participant 401k plan use a professional TPA, such as an online (or other) company.
I may be mistaken, but I remember Spirit Rider has spoken poorly about these companies in the past. He mentioned that they are not fully aware of the rules and are prone to mistakes. That scared me back then, but I think I will be going ahead with one of them later this month.
Last edited by EnjoyIt on Sat Oct 19, 2019 12:01 pm, edited 1 time in total.

simas
Posts: 463
Joined: Wed Apr 04, 2007 5:50 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by simas » Sat Oct 19, 2019 12:01 pm

EnjoyIt wrote:
Sat Oct 19, 2019 7:36 am
Where do you all keep the money? Is it at one of these firms or can you keep the cash at Vanguard/fidelity/etc?

I am looking to set the same thing up for myself this year.
Fidelity investment only retirement accounts - https://www.fidelity.com/retirement-ira ... only-plans
The cover letter you get from company like discountsolo401k also covers that (I copied small section below of what I got earlier)

Open account in trust name Be sure to open the brokerage account in the name of your 401k trust. The trust is the entity that holds the assets of your 401k plan. Similarly, the tax-exempt EIN for your 401k trust should be used to open the account.

Two of the more popular brokerage accounts opened for Solo 401k trusts are listed below. Both of these accounts are designed by the respective brokerage firms that offer them to be opened for outside retirement accounts such as your Solo 401k. In other words, the brokerage did not create the 401k plan, but they are providing an investment account for it.

Fidelity – Non-Prototype / Investment Only

Here is a link to the application: https://www.fidelity.com/customer-servi ... t-complete

Along with the completed application, they will need a copy of the Adoption Agreement.

If you have any questions for Fidelity, the Small Business Retirement Plan department which handles these account types can be reached at 800-544-5373, option 3.

Schwab – Company Retirement Account or CRA

Here is a link to the application: http://www.schwab.com/public/schwab/inv ... ness_retir ement/company_retirement_account

Schwab may be reached by phone at 800-435-4000

EnjoyIt
Posts: 2854
Joined: Sun Dec 29, 2013 8:06 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Sat Oct 19, 2019 12:04 pm

simas wrote:
Sat Oct 19, 2019 12:01 pm
EnjoyIt wrote:
Sat Oct 19, 2019 7:36 am
Where do you all keep the money? Is it at one of these firms or can you keep the cash at Vanguard/fidelity/etc?

I am looking to set the same thing up for myself this year.
Fidelity investment only retirement accounts - https://www.fidelity.com/retirement-ira ... only-plans
The cover letter you get from company like discountsolo401k also covers that (I copied small section below of what I got earlier)

Open account in trust name Be sure to open the brokerage account in the name of your 401k trust. The trust is the entity that holds the assets of your 401k plan. Similarly, the tax-exempt EIN for your 401k trust should be used to open the account.

Two of the more popular brokerage accounts opened for Solo 401k trusts are listed below. Both of these accounts are designed by the respective brokerage firms that offer them to be opened for outside retirement accounts such as your Solo 401k. In other words, the brokerage did not create the 401k plan, but they are providing an investment account for it.

Fidelity – Non-Prototype / Investment Only

Here is a link to the application: https://www.fidelity.com/customer-servi ... t-complete

Along with the completed application, they will need a copy of the Adoption Agreement.

If you have any questions for Fidelity, the Small Business Retirement Plan department which handles these account types can be reached at 800-544-5373, option 3.

Schwab – Company Retirement Account or CRA

Here is a link to the application: http://www.schwab.com/public/schwab/inv ... ness_retir ement/company_retirement_account

Schwab may be reached by phone at 800-435-4000
Thanks for the links. This is great. Can I assume that Vanguard does not do anything like this? I currently have all my accounts at Vanguard including my solo401k and my Defined Benefit Plan. I would hate to have to move everything, but willing to do so for the extra Roth space.

Cyanide123
Posts: 195
Joined: Sun May 05, 2019 9:14 am

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Cyanide123 » Sat Oct 19, 2019 12:05 pm

EnjoyIt wrote:
Sat Oct 19, 2019 11:58 am
Cyanide123 wrote:
Sat Oct 19, 2019 11:51 am
So what's the benefit of using one of these websites over using etrade? What extra features are you buying that one of the free accounts won't get you?
The ability to do after tax contributions. As an example, if a sole proprietor qualifies for trump's 199A deduction, they will get 20% tax deduction. If the same person is in the 22% or 24% tax bracket, it may be worthwhile to forgo pre-tax contributions and instead do after tax contributions. This becomes very advantageous if that person expects to be in the 10% or higher tax bracket in retirement.

Basically pay 2%-4% in taxes now and save 10% or higher in taxes in retirement.
Decreasing pre-tax investments so RMDs will be smaller
tax diversification.
So I'm personally looking to set up a solo 401k for myself.

My marginal tax rate is 35%. Making roughly 450k annually that is not expected to change much.

From what you're saying, i should stick with my plan to set up an account with etrade as i want maximum pre-tax contributions right now given my high marginal tax rate? Correct me if I'm wrong. Thanks

simas
Posts: 463
Joined: Wed Apr 04, 2007 5:50 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by simas » Sat Oct 19, 2019 12:23 pm

EnjoyIt wrote:
Sat Oct 19, 2019 12:00 pm
Luckywon wrote:
Sat Oct 19, 2019 11:32 am

The online companies referenced in this thread are TPA's. I believe Spirit Rider is stating that someone amending to a custom one-participant 401k plan use a professional TPA, such as an online (or other) company.
I may be mistaken, but I remember Spirit Rider has spoken poorly about these companies in the past. He mentioned that they are not fully aware of the rules and are prone to mistakes. That scared me back then, but I think I will be going ahead with one of them later this month.
The discountsolo401 is not a TPA. They provide you with the plan, the ensure that plan continues to be certified/compliant. they are not an administrator of the plan, I am not sure there the assumption that these companies are third party administrators (those services are significantly more expensive and in my opinion are not necessary for a very basic solo 401k plan) ...

what @SpiritRider mentions and in my opinion correctly is that if you are dealing with any serious matters (taxes, retirement accounts), you need to
a) know what you are doing
b) pay attention (to date deadlines, to amount calculations, etc).
c) follow the directions correctly.

this is no different in solo 401k plan or IRA rollovers or tax credits people claim, or any other operation. This board is full of people posting to find out they have missed deadlines, made ineligible contributions, waited too long on rollovers, and many other easily preventable items. If you can not be bothered to read the actual IRS publication (which do spell this out), great - there are people (CPAs, etc) who will consult you on this. As saying goes ignorance of the law does not excuse not following it.

At the same time, solo401k for one/two (with your spouse) people is not rocket science. know when you can make employee contributions and how limits are calculated, know what profit sharing employer contribution formulas are, know the total amounts you can contributed as calculated based on your entity type and net business profit. If you do not want to know these details - sure, hire someone. otherwise, this takes an hour a year for me max. if you did rollovers -> issue 1099R to the yourself as participant and account for it in taxes (otherwise skip). If the total amount in the plan is >250k => prepare form 5500 (otherwise skip). nothing here is complex. just pay attention and after the first time you do it, it is simpler than many many things you routinely do in your life without giving it much thought..

simas
Posts: 463
Joined: Wed Apr 04, 2007 5:50 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by simas » Sat Oct 19, 2019 12:25 pm

EnjoyIt wrote:
Sat Oct 19, 2019 12:04 pm
simas wrote:
Sat Oct 19, 2019 12:01 pm
EnjoyIt wrote:
Sat Oct 19, 2019 7:36 am
Where do you all keep the money? Is it at one of these firms or can you keep the cash at Vanguard/fidelity/etc?

I am looking to set the same thing up for myself this year.
Fidelity investment only retirement accounts - https://www.fidelity.com/retirement-ira ... only-plans
The cover letter you get from company like discountsolo401k also covers that (I copied small section below of what I got earlier)

Open account in trust name Be sure to open the brokerage account in the name of your 401k trust. The trust is the entity that holds the assets of your 401k plan. Similarly, the tax-exempt EIN for your 401k trust should be used to open the account.

Two of the more popular brokerage accounts opened for Solo 401k trusts are listed below. Both of these accounts are designed by the respective brokerage firms that offer them to be opened for outside retirement accounts such as your Solo 401k. In other words, the brokerage did not create the 401k plan, but they are providing an investment account for it.

Fidelity – Non-Prototype / Investment Only

Here is a link to the application: https://www.fidelity.com/customer-servi ... t-complete

Along with the completed application, they will need a copy of the Adoption Agreement.

If you have any questions for Fidelity, the Small Business Retirement Plan department which handles these account types can be reached at 800-544-5373, option 3.

Schwab – Company Retirement Account or CRA

Here is a link to the application: http://www.schwab.com/public/schwab/inv ... ness_retir ement/company_retirement_account

Schwab may be reached by phone at 800-435-4000
Thanks for the links. This is great. Can I assume that Vanguard does not do anything like this? I currently have all my accounts at Vanguard including my solo401k and my Defined Benefit Plan. I would hate to have to move everything, but willing to do so for the extra Roth space.
SpiritRider answered that above - No, Vanguard is not currently in this market and not competitive if you want key features of such plans (after tax non-roth contributions, etc).

"Vanguard is the worst choice for a custodian of a custom one-participant 401k plan.

They only offer a single pooled account that you must separately account for any pre-tax, Roth or employee after-tax asset contributions and earnings. Fidelity and the other low-cost brokerage options offer separate accounts to ease the record keeping burden.

Remember, if you set up one of these you are responsible for all 401k trustee, record keeping, reporting, administration and compliance.
"

Luckywon
Posts: 544
Joined: Tue Mar 28, 2017 10:33 am

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Luckywon » Sat Oct 19, 2019 12:31 pm

EnjoyIt wrote:
Sat Oct 19, 2019 12:00 pm
Luckywon wrote:
Sat Oct 19, 2019 11:32 am

The online companies referenced in this thread are TPA's. I believe Spirit Rider is stating that someone amending to a custom one-participant 401k plan use a professional TPA, such as an online (or other) company.
I may be mistaken, but I remember Spirit Rider has spoken poorly about these companies in the past. He mentioned that they are not fully aware of the rules and are prone to mistakes. That scared me back then, but I think I will be going ahead with one of them later this month.
simas wrote:
Sat Oct 19, 2019 12:23 pm
The discountsolo401 is not a TPA. They provide you with the plan, the ensure that plan continues to be certified/compliant. they are not an administrator of the plan, I am not sure there the assumption that these companies are third party administrators (those services are significantly more expensive and in my opinion are not necessary for a very basic solo 401k plan) ...

what @SpiritRider mentions and in my opinion correctly is that if you are dealing with any serious matters (taxes, retirement accounts), you need to
a) know what you are doing
b) pay attention (to date deadlines, to amount calculations, etc).
c) follow the directions correctly.

this is no different in solo 401k plan or IRA rollovers or tax credits people claim, or any other operation. This board is full of people posting to find out they have missed deadlines, made ineligible contributions, waited too long on rollovers, and many other easily preventable items. If you can not be bothered to read the actual IRS publication (which do spell this out), great - there are people (CPAs, etc) who will consult you on this. As saying goes ignorance of the law does not excuse not following it.

At the same time, solo401k for one/two (with your spouse) people is not rocket science. know when you can make employee contributions and how limits are calculated, know what profit sharing employer contribution formulas are, know the total amounts you can contributed as calculated based on your entity type and net business profit. If you do not want to know these details - sure, hire someone. otherwise, this takes an hour a year for me max. if you did rollovers -> issue 1099R to the yourself as participant and account for it in taxes (otherwise skip). If the total amount in the plan is >250k => prepare form 5500 (otherwise skip). nothing here is complex. just pay attention and after the first time you do it, it is simpler than many many things you routinely do in your life without giving it much thought..
Thanks for the above. I currently have my plan at Etrade using their boilerplate plan but will likely want to do the MBR next year so will be needing a custom plan. I was thinking of using one of the online companies but obviously need to do more diligence.

jdilla1107
Posts: 784
Joined: Sun Jun 24, 2012 8:31 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jdilla1107 » Sat Oct 19, 2019 12:39 pm

EnjoyIt wrote:
Sat Oct 19, 2019 11:58 am
Cyanide123 wrote:
Sat Oct 19, 2019 11:51 am
So what's the benefit of using one of these websites over using etrade? What extra features are you buying that one of the free accounts won't get you?
The ability to do after tax contributions. As an example, if a sole proprietor qualifies for trump's 199A deduction, they will get 20% tax deduction. If the same person is in the 22% or 24% tax bracket, it may be worthwhile to forgo pre-tax contributions and instead do after tax contributions. This becomes very advantageous if that person expects to be in the 10% or higher tax bracket in retirement.

Basically pay 2%-4% in taxes now and save 10% or higher in taxes in retirement.
Decreasing pre-tax investments so RMDs will be smaller
tax diversification.
What do you mean pay 2-4% in taxes now? If you get the QBI of 20% and are in the 22% bracket, then your marginal rate is 17.6%.

EnjoyIt
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Sat Oct 19, 2019 12:52 pm

Cyanide123 wrote:
Sat Oct 19, 2019 12:05 pm
EnjoyIt wrote:
Sat Oct 19, 2019 11:58 am
Cyanide123 wrote:
Sat Oct 19, 2019 11:51 am
So what's the benefit of using one of these websites over using etrade? What extra features are you buying that one of the free accounts won't get you?
The ability to do after tax contributions. As an example, if a sole proprietor qualifies for trump's 199A deduction, they will get 20% tax deduction. If the same person is in the 22% or 24% tax bracket, it may be worthwhile to forgo pre-tax contributions and instead do after tax contributions. This becomes very advantageous if that person expects to be in the 10% or higher tax bracket in retirement.

Basically pay 2%-4% in taxes now and save 10% or higher in taxes in retirement.
Decreasing pre-tax investments so RMDs will be smaller
tax diversification.
So I'm personally looking to set up a solo 401k for myself.

My marginal tax rate is 35%. Making roughly 450k annually that is not expected to change much.

From what you're saying, i should stick with my plan to set up an account with etrade as i want maximum pre-tax contributions right now given my high marginal tax rate? Correct me if I'm wrong. Thanks
If you are in the 35% tax bracket and you do not qualify for the 199a deduction then yes a regular pre-tax 401k is right for you. This is what I have done when in the top tax brackets.

On the other hand, if you are in the 35% tax bracket and expect that any additional money saved pre-tax will be withdrawn at the 35% or higher then a pretax account is for you.

EnjoyIt
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Sat Oct 19, 2019 2:40 pm

jdilla1107 wrote:
Sat Oct 19, 2019 12:39 pm
EnjoyIt wrote:
Sat Oct 19, 2019 11:58 am
Cyanide123 wrote:
Sat Oct 19, 2019 11:51 am
So what's the benefit of using one of these websites over using etrade? What extra features are you buying that one of the free accounts won't get you?
The ability to do after tax contributions. As an example, if a sole proprietor qualifies for trump's 199A deduction, they will get 20% tax deduction. If the same person is in the 22% or 24% tax bracket, it may be worthwhile to forgo pre-tax contributions and instead do after tax contributions. This becomes very advantageous if that person expects to be in the 10% or higher tax bracket in retirement.

Basically pay 2%-4% in taxes now and save 10% or higher in taxes in retirement.
Decreasing pre-tax investments so RMDs will be smaller
tax diversification.
What do you mean pay 2-4% in taxes now? If you get the QBI of 20% and are in the 22% bracket, then your marginal rate is 17.6%.
You are correct. My math was flat out wrong.

let us run an example scenario and look at the math closer. Someone who is in the 24% tax bracket who makes an additional self employed $100 with only $25 of 401k space left
Option #1: Save 25% or $25 as an employer portion of the 401k. Of the $75, 20% will be tax deductible due to QBI so this person will pay $60 * 24% = $14.40 in taxes and have $25 in a 401k that will need to have taxes paid for in the future.
Option #2: Take the $100 as profit of which 20% will be deducted due to QBI, therefor this person will pay $80 * 24% = $19.20 in taxes and then place $25 in an after tax 401k and convert it to a Roth.

As you stated above this person will be paying an extra $19.20 - $14.40 = $4.80 in taxes or and extra 4.8% in taxes on the $100 profit but will be able to pull the $25 out tax free in the future because it is Roth money.

Please feel free to correct my math or point out if I am missing anything.

retiredjg
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by retiredjg » Sat Oct 19, 2019 3:02 pm

Luckywon wrote:
Sat Oct 19, 2019 11:32 am
EnjoyIt wrote:
Sat Oct 19, 2019 10:50 am
Spirit Rider wrote:
Sat Oct 19, 2019 8:40 am
Vanguard is the worst choice for a custodian of a custom one-participant 401k plan.

They only offer a single pooled account that you must separately account for any pre-tax, Roth or employee after-tax asset contributions and earnings. Fidelity and the other low-cost brokerage options offer separate accounts to ease the record keeping burden.

Remember, if you set up one of these you are responsible for all 401k trustee, record keeping, reporting, administration and compliance.

As I like to remind people. A one-participant 401k plan is still a complex 401k plan. Subject to almost ALL of the relevant tax code, IRS regulations, guidance and publications.

I always recommended that someone amending to a custom one-participant 401k plan, use a professional TPA. Most people ignore that advice even though they don't know what they don't know.

I'm betting the majority make plan errors within two years. The only saving grace is that these are still too new and one-participant 401k plans are not an audit priority for the IRS.
May I ask, what exactly does a TPA offer that these online companies do not?
The online companies referenced in this thread are TPA's. I believe Spirit Rider is stating that someone amending to a custom one-participant 401k plan use a professional TPA, such as an online (or other) company.
Luckywon, I believe you are mistaken about the part in blue...although you are not alone in thinking this.

The online companies referenced in this thread are plan providers. I do not believe any of them is a "third party administrator" or TPA. I do believe some or all try to "help out" though.

This TPA thing has come up a lot lately. If someone can provide any information on any of these plan providers that shows they also administer the plans, this would be a good time to get that straight once and for all. It could be that I'm the one with the wrong information. :|

It is my opinion that the people are trying to administer their own plans because they don't want to pay for the TPA each year. Probably most do not know what they are doing even though the plan providers are trying to be helpful.

I fear that the stuff is going to hit the fan for someone somewhere along the line and that the results will not be pretty.

Can anybody here show any indication that the above providers are acting as plan administrators? Or that the plan providers have claimed to be acting as plan administrators?

Spirit Rider
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Spirit Rider » Sat Oct 19, 2019 3:12 pm

simas wrote:
Sat Oct 19, 2019 12:23 pm
EnjoyIt wrote:
Sat Oct 19, 2019 12:00 pm
Luckywon wrote:
Sat Oct 19, 2019 11:32 am
The online companies referenced in this thread are TPA's. I believe Spirit Rider is stating that someone amending to a custom one-participant 401k plan use a professional TPA, such as an online (or other) company.
I may be mistaken, but I remember Spirit Rider has spoken poorly about these companies in the past. He mentioned that they are not fully aware of the rules and are prone to mistakes. That scared me back then, but I think I will be going ahead with one of them later this month.
The discountsolo401 is not a TPA. They provide you with the plan, the ensure that plan continues to be certified/compliant. they are not an administrator of the plan, I am not sure there the assumption that these companies are third party administrators (those services are significantly more expensive and in my opinion are not necessary for a very basic solo 401k plan) ...

what @SpiritRider mentions and in my opinion correctly is that if you are dealing with any serious matters (taxes, retirement accounts), you need to
a) know what you are doing
b) pay attention (to date deadlines, to amount calculations, etc).
c) follow the directions correctly.
@simas is 100% correct.

These online companies are most definitely NOT TPAs. They are mostly just reselling 401k plan document services. Some of them will include in their service the completion of your Form 1099-R for any year you have an in-plan Roth Rollover or in-service withdrawal/rollover. Make no mistake about it YOU are the trustee, record keeper and plan administrator. YOU are responsible for all contributions, tracking of earnings and distributions of those accounts. YOU are responsible for insuring that the 401k plan is fully compliant with the applicable tax laws, IRS rules and regulations.

Most of the people with prototype one-participant 401k plans through E-Trade, Fidelity, Schwab, TD Ameritrade and Vanguard. Do not fully understand the basic compliance and contribution requirements of those standard plans. Let alone administer a custom one-participant 401k plan to utilize a Mega Backdoor Roth.

It is certainly possible for an individual to do this safely, but the majority of people just think it is a bigger IRA. Instead of a full fledged 401k that has 100% vesting, no anti-discrimination requirements and reduced reporting requirements. Most have no idea of the unique contribution requirements for low -> moderate self-employed earned income.

I do not back away from my recommendation that mostly everyone doing this should pay for a professional TPA the first year. Another alternative is to go directly to Ascensus. A plan document provider and one of the largest small to medium plan TPAs in the country. License a 401k plan directly from them, pay yearly plan maintenance fees directly to them and pay for optional TPA services ala carte until you fully understand the issues. At least you will have somebody who actually fully understands 401k plan compliance. Sometimes Bogleheads are too cheap for their own good. Take the long view, is it really going to hurt to pay a little extra for the first year or two to make sure you do it right.

Then learn, the most applicable 401k tax laws, IRS regulations, guidance and publications. There are individuals such as @jacoavlu who went down this path from 0 - 60 in a very short period time, who I have no doubt is competent to administer their own custom one-participant 401k plan to utilize the Mega Backdoor Roth. There are many others who see nothing but the dollar$ of opportunity, will remain blissfully unaware and subject to serious 401k plan errors waiting to happen. This is not rocket science, but don't think it is just a larger IRA.

EnjoyIt
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Sat Oct 19, 2019 3:32 pm

jacoavlu wrote:
Fri Oct 18, 2019 7:26 pm
^^^ at one point they had a contribution calculator on their site and it was wrong. Or at least wrong some of the time.

You have to use The Finance Buffs spreadsheet to verify your calculations.
I tried finding this calculation and probably not typing in the correct google search. Can you please share a link?

sarabayo
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by sarabayo » Sat Oct 19, 2019 3:36 pm

EnjoyIt wrote:
Sat Oct 19, 2019 3:32 pm
jacoavlu wrote:
Fri Oct 18, 2019 7:26 pm
^^^ at one point they had a contribution calculator on their site and it was wrong. Or at least wrong some of the time.

You have to use The Finance Buffs spreadsheet to verify your calculations.
I tried finding this calculation and probably not typing in the correct google search. Can you please share a link?
Here it is. Take note of the multiple tabs at the bottom of the screen -- there are different calculations based on whether your self-employed business in incorporated or unincorporated.

Topic Author
jt4
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jt4 » Sat Oct 19, 2019 6:35 pm

Spirit Rider wrote:
Sat Oct 19, 2019 3:12 pm
@simas is 100% correct.

These online companies are most definitely NOT TPAs. They are mostly just reselling 401k plan document services. Some of them will include in their service the completion of your Form 1099-R for any year you have an in-plan Roth Rollover or in-service withdrawal/rollover. Make no mistake about it YOU are the trustee, record keeper and plan administrator. YOU are responsible for all contributions, tracking of earnings and distributions of those accounts. YOU are responsible for insuring that the 401k plan is fully compliant with the applicable tax laws, IRS rules and regulations.

Most of the people with prototype one-participant 401k plans through E-Trade, Fidelity, Schwab, TD Ameritrade and Vanguard. Do not fully understand the basic compliance and contribution requirements of those standard plans. Let alone administer a custom one-participant 401k plan to utilize a Mega Backdoor Roth.

It is certainly possible for an individual to do this safely, but the majority of people just think it is a bigger IRA. Instead of a full fledged 401k that has 100% vesting, no anti-discrimination requirements and reduced reporting requirements. Most have no idea of the unique contribution requirements for low -> moderate self-employed earned income.

I do not back away from my recommendation that mostly everyone doing this should pay for a professional TPA the first year. Another alternative is to go directly to Ascensus. A plan document provider and one of the largest small to medium plan TPAs in the country. License a 401k plan directly from them, pay yearly plan maintenance fees directly to them and pay for optional TPA services ala carte until you fully understand the issues. At least you will have somebody who actually fully understands 401k plan compliance. Sometimes Bogleheads are too cheap for their own good. Take the long view, is it really going to hurt to pay a little extra for the first year or two to make sure you do it right.

Then learn, the most applicable 401k tax laws, IRS regulations, guidance and publications. There are individuals such as @jacoavlu who went down this path from 0 - 60 in a very short period time, who I have no doubt is competent to administer their own custom one-participant 401k plan to utilize the Mega Backdoor Roth. There are many others who see nothing but the dollar$ of opportunity, will remain blissfully unaware and subject to serious 401k plan errors waiting to happen. This is not rocket science, but don't think it is just a larger IRA.
Hi Spirit Rider,

Given that you're one of the most knowledgeable members of this forum on the topic of tax rules on retirement accounts, what gotchas do you see with a self-administered Solo 401K.

To me, if you're doing "normal" brokerage investing in a solo 401k, the main things you should be aware of regarding tax rules are
  • Proper registration of the Solo 401K in the name of a trust
  • Contribution limits (for both employee and employer contributions) based on earned self-employment income
  • 1099-R Rollover reporting
  • 5500 reporting when assets are > 250K
  • standard accounting of pre-tax, Roth, and after-tax contributions + distributions
Anything else I'm missing?

I understand your recommendation for a TPA for the general public... But if you're not doing anything that complicated, what's the big fear for DIY? (Of course, if you don't know what you're doing and you have a lot of assets, you can create bad tax consequences for most accounts.)

Thanks for your input.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by tfb » Sat Oct 19, 2019 6:43 pm

I don't recommend going with any of these providers either. Hire a real TPA for two years. See what they have you do and do for you during the two years. Then follow the same process yourself. This is not the place to go cheap.
Harry Sit, taking a break from the forums.

jdilla1107
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jdilla1107 » Sat Oct 19, 2019 7:15 pm

EnjoyIt wrote:
Sat Oct 19, 2019 2:40 pm
jdilla1107 wrote:
Sat Oct 19, 2019 12:39 pm
EnjoyIt wrote:
Sat Oct 19, 2019 11:58 am
Cyanide123 wrote:
Sat Oct 19, 2019 11:51 am
So what's the benefit of using one of these websites over using etrade? What extra features are you buying that one of the free accounts won't get you?
The ability to do after tax contributions. As an example, if a sole proprietor qualifies for trump's 199A deduction, they will get 20% tax deduction. If the same person is in the 22% or 24% tax bracket, it may be worthwhile to forgo pre-tax contributions and instead do after tax contributions. This becomes very advantageous if that person expects to be in the 10% or higher tax bracket in retirement.

Basically pay 2%-4% in taxes now and save 10% or higher in taxes in retirement.
Decreasing pre-tax investments so RMDs will be smaller
tax diversification.
What do you mean pay 2-4% in taxes now? If you get the QBI of 20% and are in the 22% bracket, then your marginal rate is 17.6%.
You are correct. My math was flat out wrong.

let us run an example scenario and look at the math closer. Someone who is in the 24% tax bracket who makes an additional self employed $100 with only $25 of 401k space left
Option #1: Save 25% or $25 as an employer portion of the 401k. Of the $75, 20% will be tax deductible due to QBI so this person will pay $60 * 24% = $14.40 in taxes and have $25 in a 401k that will need to have taxes paid for in the future.
Option #2: Take the $100 as profit of which 20% will be deducted due to QBI, therefor this person will pay $80 * 24% = $19.20 in taxes and then place $25 in an after tax 401k and convert it to a Roth.

As you stated above this person will be paying an extra $19.20 - $14.40 = $4.80 in taxes or and extra 4.8% in taxes on the $100 profit but will be able to pull the $25 out tax free in the future because it is Roth money.

Please feel free to correct my math or point out if I am missing anything.
This is strange math. It's all technically correct, but I feel like you are tricking yourself at the conclusion. In your example, the $100 has nothing to do with anything, because only $25 is changing locations. The person is paying taxes of 19.2% on the $25 in option #2.

The correct analysis is to compare the marginal rate on your contribution (19.2%) against the marginal rate at withdrawal time.

Topic Author
jt4
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jt4 » Sat Oct 19, 2019 9:07 pm

tfb wrote:
Sat Oct 19, 2019 6:43 pm
I don't recommend going with any of these providers either. Hire a real TPA for two years. See what they have you do and do for you during the two years. Then follow the same process yourself. This is not the place to go cheap.
@tfb, I appreciate your comment, but couldn't this statement apply to all accounts + tax preparation in general, i.e. let a third-party do your accounting and taxes for a few years and then follow the same process? I understand how this statement is sensible for the general population, but this blog tends to be skewed towards a population that is reasonably knowledgable regarding personal finance. I feel that we could take this same advice and further apply it to justify the use of fee-based investment advising, CPAs, and tax services. Sure, this makes sense for some people, but ...

What did you learn from having a TPA for your Solo 401K?

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by tfb » Sat Oct 19, 2019 9:41 pm

jt4 wrote:
Sat Oct 19, 2019 9:07 pm
I understand how this statement is sensible for the general population, but this blog tends to be skewed towards a population that is reasonably knowledgable regarding personal finance.
Administering a 401k has little to do with personal finance, taxes, or investments. Even CPAs who do personal and small business taxes usually don't administer 401k plans. It's a whole separate area of practice. You can be as knowledgeable in taxes as a CPA but still don't know much about administering 401k plans.
Harry Sit, taking a break from the forums.

Topic Author
jt4
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jt4 » Sat Oct 19, 2019 9:56 pm

tfb wrote:
Sat Oct 19, 2019 9:41 pm
jt4 wrote:
Sat Oct 19, 2019 9:07 pm
I understand how this statement is sensible for the general population, but this blog tends to be skewed towards a population that is reasonably knowledgable regarding personal finance.
Administering a 401k has little to do with personal finance, taxes, or investments. Even CPAs who do personal and small business taxes usually don't administer 401k plans. It's a whole separate area of practice. You can be as knowledgeable in taxes as a CPA but still don't know much about administering 401k plans.
Thanks for your reply. What did you learn from having a TPA administer your Solo 401K?

Luckywon
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Luckywon » Sat Oct 19, 2019 11:25 pm

retiredjg wrote:
Sat Oct 19, 2019 3:02 pm
Luckywon wrote:
Sat Oct 19, 2019 11:32 am
EnjoyIt wrote:
Sat Oct 19, 2019 10:50 am
Spirit Rider wrote:
Sat Oct 19, 2019 8:40 am
Vanguard is the worst choice for a custodian of a custom one-participant 401k plan.

They only offer a single pooled account that you must separately account for any pre-tax, Roth or employee after-tax asset contributions and earnings. Fidelity and the other low-cost brokerage options offer separate accounts to ease the record keeping burden.

Remember, if you set up one of these you are responsible for all 401k trustee, record keeping, reporting, administration and compliance.

As I like to remind people. A one-participant 401k plan is still a complex 401k plan. Subject to almost ALL of the relevant tax code, IRS regulations, guidance and publications.

I always recommended that someone amending to a custom one-participant 401k plan, use a professional TPA. Most people ignore that advice even though they don't know what they don't know.

I'm betting the majority make plan errors within two years. The only saving grace is that these are still too new and one-participant 401k plans are not an audit priority for the IRS.
May I ask, what exactly does a TPA offer that these online companies do not?
The online companies referenced in this thread are TPA's. I believe Spirit Rider is stating that someone amending to a custom one-participant 401k plan use a professional TPA, such as an online (or other) company.
Luckywon, I believe you are mistaken about the part in blue...although you are not alone in thinking this.

The online companies referenced in this thread are plan providers. I do not believe any of them is a "third party administrator" or TPA. I do believe some or all try to "help out" though.

This TPA thing has come up a lot lately. If someone can provide any information on any of these plan providers that shows they also administer the plans, this would be a good time to get that straight once and for all. It could be that I'm the one with the wrong information. :|

It is my opinion that the people are trying to administer their own plans because they don't want to pay for the TPA each year. Probably most do not know what they are doing even though the plan providers are trying to be helpful.

I fear that the stuff is going to hit the fan for someone somewhere along the line and that the results will not be pretty.

Can anybody here show any indication that the above providers are acting as plan administrators? Or that the plan providers have claimed to be acting as plan administrators?
I really appreciate the expertise of all above. My plan is to move next year from a prototype single participant 401k at Etrade to a custom single participant 401k. The reason for this is that I anticipate a drop in income to the extent I will be ineligible to make the maximum employer profit sharing pretax contributions. Therefore I see the MBR as a good option to fill the space up to the maximum 401k contributions limits. My plan was to use either discountsolo401k or mysolo401k, both of whom I have contacted and gave the impression they could easily assist me with this.

I realize that ignoring the advice of experts such as Spirit Rider in this area is a fool's errand, and have shelved my plans to use one of the online companies based on what has been written here. But I would appreciate very much clarification of:

-What exactly is the difference between a plan provider and administrator?
-Given that the online companies told me they could implement my plans above, can anyone offer more specific information on what could go wrong if I used one of them rather than hiring a TPA?

Many thanks for any further explanation offered.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Spirit Rider » Sat Oct 19, 2019 11:40 pm

jt4 wrote:
Sat Oct 19, 2019 9:56 pm
Thanks for your reply. What did you learn from having a TPA administer your Solo 401K?
It might useful for you to know that @tfb is AKA The Finance Buff and is the granddaddy of the one-participant Mega Backdoor Roth.

When IRS Notice 2014-54 blessed the Mega Backdoor Roth on 9/14/14. He was ready and raring to go with his own one-participant Mega Backdoor Roth 401k. Then he popularized it with the seminal blog post; "Mega Backdoor Roth In Solo 401k: Control Your Own Destiny."

He didn't need to hire a TPA, because he had the detailed knowledge of what was necessary to fully self-administer a one-participant 401k plan.

The average one-participant 401k plan sponsor on Bogleheads is lucky if they know how to manage the limited administrative responsibities they have.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by tfb » Sun Oct 20, 2019 12:35 am

jt4 wrote:
Sat Oct 19, 2019 9:56 pm
What did you learn from having a TPA administer your Solo 401K?
I have CEBS certification and four years full-time experience working on 401k plans. If you really want to be your own administrator, maybe study the QKA curriculum.
Harry Sit, taking a break from the forums.

Luckywon
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Luckywon » Sun Oct 20, 2019 12:38 am

I'm going to heed the advice given and seek a TPA to administrate my single participant 401k, including making MBR contributions. Would appreciate insight into what reasonable fees would be. I'm in California, if that makes any difference. Any specific companies recommended?

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by tfb » Sun Oct 20, 2019 1:16 am

Luckywon wrote:
Sun Oct 20, 2019 12:38 am
I'm going to heed the advice given and seek a TPA to administrate my single participant 401k, including making MBR contributions. Would appreciate insight into what reasonable fees would be. I'm in California, if that makes any difference. Any specific companies recommended?
Random search turned up this post on a message board for plan administrators:

https://benefitslink.com/boards/index.p ... ent=296149

If that administrator also provides annual administration for $500 it's worth a shot.
Harry Sit, taking a break from the forums.

Luckywon
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Luckywon » Sun Oct 20, 2019 1:19 am

tfb wrote:
Sun Oct 20, 2019 1:16 am
Luckywon wrote:
Sun Oct 20, 2019 12:38 am
I'm going to heed the advice given and seek a TPA to administrate my single participant 401k, including making MBR contributions. Would appreciate insight into what reasonable fees would be. I'm in California, if that makes any difference. Any specific companies recommended?
Random search turned up this post on a message board for plan administrators:

https://benefitslink.com/boards/index.p ... ent=296149

If that administrator also provides annual administration for $500 it's worth a shot.
Many thanks tfb, I will inquire.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by retiredjg » Sun Oct 20, 2019 7:29 am

jt4 wrote:
Sat Oct 19, 2019 6:35 pm
I understand your recommendation for a TPA for the general public... But if you're not doing anything that complicated, what's the big fear for DIY?
"You don't know what you don't know." -Spirit Rider

retiredjg
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by retiredjg » Sun Oct 20, 2019 8:01 am

jt4 wrote:
Sat Oct 19, 2019 9:07 pm
I understand how this statement is sensible for the general population, but this blog tends to be skewed towards a population that is reasonably knowledgable regarding personal finance.
Well yes and no.

I agree with you that there are many people here who not only know a lot on many subjects, but they are also able to learn a lot very fast. Some are capable of doing this Solo Mega thing we are talking about and getting it done right.

The rest of the thousands of readers and posters are ordinary people in the general population. They have no background or knowledge in this area but they want to do it too. Therein lies the problem...they are eager to get on the bandwagon but they do not know what they do not know.

The best example is the fact that so many people don't realize that people providing these custom plans do not also act as their plan administrators. Eventually, this is going to hurt someone.

We have seen this problem before in the form of what has happened with the ordinary "back door". A few people caught on and did it successfully and in the next 10 years or so the thousands of people jumped on that band wagon. Many do not know what they were doing and fixing back door problems has developed into the most common problem with deal with here.

People are constantly creating an unmitigated mess with their back doors to Roth IRA. They either cannot figure out the paperwork or they didn't know about IRAs on the side or they didn't know about the form or they just have no idea what it is and how it works. Then they mess it up and ask for help and huge amounts of time are spent unwinding these things.

We don't want to see all that happen again with the Solo Mega Back Door.

There is incredible interest in a Solo Mega Back Door product these days. A few products exist but people are trying to save money by not hiring a real plan administrator to administer the plan. Or they don't know they need a real plan administrator. Or they are told they can do it themselves. Or they think the plan provider is the administrator. Or any number of other things.

Some of us can see where this is going and would like to avoid as much of that as possible.

Luckywon
Posts: 544
Joined: Tue Mar 28, 2017 10:33 am

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Luckywon » Sun Oct 20, 2019 11:03 am

retiredjg wrote:
Sun Oct 20, 2019 8:01 am
jt4 wrote:
Sat Oct 19, 2019 9:07 pm
I understand how this statement is sensible for the general population, but this blog tends to be skewed towards a population that is reasonably knowledgable regarding personal finance.
Well yes and no.

I agree with you that there are many people here who not only know a lot on many subjects, but they are also able to learn a lot very fast. Some are capable of doing this Solo Mega thing we are talking about and getting it done right.

The rest of the thousands of readers and posters are ordinary people in the general population. They have no background or knowledge in this area but they want to do it too. Therein lies the problem...they are eager to get on the bandwagon but they do not know what they do not know.

The best example is the fact that so many people don't realize that people providing these custom plans do not also act as their plan administrators. Eventually, this is going to hurt someone.

We have seen this problem before in the form of what has happened with the ordinary "back door". A few people caught on and did it successfully and in the next 10 years or so the thousands of people jumped on that band wagon. Many do not know what they were doing and fixing back door problems has developed into the most common problem with deal with here.

People are constantly creating an unmitigated mess with their back doors to Roth IRA. They either cannot figure out the paperwork or they didn't know about IRAs on the side or they didn't know about the form or they just have no idea what it is and how it works. Then they mess it up and ask for help and huge amounts of time are spent unwinding these things.

We don't want to see all that happen again with the Solo Mega Back Door.

There is incredible interest in a Solo Mega Back Door product these days. A few products exist but people are trying to save money by not hiring a real plan administrator to administer the plan. Or they don't know they need a real plan administrator. Or they are told they can do it themselves. Or they think the plan provider is the administrator. Or any number of other things.

Some of us can see where this is going and would like to avoid as much of that as possible.
retiredjg, I appreciate your insights on this thread (and countless others) which hopefully will help avert serious 401k problems for me down the road. It would be very helpful if someone could provide a summary of how solo 401k plan providers (like the online companies mentioned previously) and TPA's differ. What exactly will a TPA do for me that a plan provider will not? Some things have been alluded to but if it could be summarized in "dummy format" that may go a long way to clearing up the problem you allude to above.

retiredjg
Posts: 38406
Joined: Thu Jan 10, 2008 12:56 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by retiredjg » Sun Oct 20, 2019 11:13 am

I agree with you. It would be helpful to know more of the details. I have some vague ideas, but it's a bit muddy to me as well.

Spirit Rider
Posts: 11870
Joined: Fri Mar 02, 2007 2:39 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Spirit Rider » Sun Oct 20, 2019 1:40 pm

retiredjg wrote:
Sun Oct 20, 2019 11:13 am
I agree with you. It would be helpful to know more of the details. I have some vague ideas, but it's a bit muddy to me as well.
Off of the top of my head, here are just some the things a TPA could prevent:
  • Trustee errors regarding contributions, withdrawals or rollovers.
  • Reporting errors regarding contributions, withdrawals or rollovers.
  • Record keeping errors. Basic errors and failing to separately account for not just type but distributable nature.
  • Amendment errors. Initial amendment (timing, effective date and provisions). Additional complex rules.
  • Mistakenly having two 401k plans for the same business which is prohibited.
  • Making excess employer contributions that can not be returned.
  • Making excess annual additions by failing to take into account that there is also a 100% of compensation limit in 415c and that employer contributions reduce compensation and also reduce the resulting reduced annual addition limit.
  • Prohibited transactions.
  • General 401k plan compliance issues. Most often operational errors. The failure to explicitly follow ALL of the terms of the 401k plan document.
  • I wonder just how many people who use MySolo401k.com, DiscountSolo401k.com, Solo401k.com or other 401k plan document only sources. Actually read and understand the entire 401k plan document and understand they are the one responsible for following them to the letter.

jacoavlu
Posts: 759
Joined: Sun Jan 06, 2013 12:06 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jacoavlu » Sun Oct 20, 2019 2:02 pm

Along the lines of two 401ks. I would add, avoiding Controlled Group and Affiliated Service Group issues.

Such errors could be very costly in the case is spousal attribution rules when one spouse establishes a solo 401k, while the other spouse owns a business with employees.

HomeStretch
Posts: 2866
Joined: Thu Dec 27, 2018 3:06 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by HomeStretch » Sun Oct 20, 2019 2:59 pm

jt4 wrote:
Sat Oct 19, 2019 6:35 pm
To me, if you're doing "normal" brokerage investing in a solo 401k, the main things you should be aware of regarding tax rules are
  • Proper registration of the Solo 401K in the name of a trust
  • Contribution limits (for both employee and employer contributions) based on earned self-employment income
  • 1099-R Rollover reporting
  • 5500 reporting when assets are > 250K
  • standard accounting of pre-tax, Roth, and after-tax contributions + distributions
Anything else I'm missing?
One thing that comes to mind is keeping plan documents current.

When the plan is set-up, the prototype plan document from the provider (which has been pre-approved by the IRS) is adopted. There is either a 5 or 6-year cycle (I can’t recall which) where the employer has to re-adopt the latest plan document from the provider. The plan document is updated periodically by the provider to include new rules and regulations in order for the prototype plan to remain qualified.

I haven’t hit year 5 with my plan yet so I haven’t done this for a Solo 401k but I will touch base with Fidelity about this at the appropriate time.

EnjoyIt
Posts: 2854
Joined: Sun Dec 29, 2013 8:06 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Sun Oct 20, 2019 9:47 pm

I’m sure there is plenty I don’t know about 401K, but I have managed my own solo401k for years and have found it pretty easy because my situation is simple.

I have no employees but myself. My income has always been enough that 25% employer contributions plus the employee contribution would max the 401k every year.

Then, a few years ago I started a defined benefit plan which changed my employer contribution down to 6%.
Still pretty easy and simple.

Only big deal was doing the 5500 when I broke $250k and reporting the contributions in the corporate tax return.

Now that I am only contributing 6% employer portion I have available plenty of 401k space for after tax contributions. I just don’t see where the complexity is that I need to avoid doing this myself.

Sure the first time I did a Backdoor Roth on my own I found it tedious to learn all the details, but now it is a piece of cake. The first time I filed my own 1120s it took me many hours and education. Now it is a piece of cake as well. Same goes for my 941, 940, 1040, and whatever else I need to do.

So what is so special about the 401k after tax contribution that a guy like me can’t figure out?

ICMoney
Posts: 274
Joined: Fri Oct 28, 2016 2:38 pm

Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by ICMoney » Mon Oct 21, 2019 1:21 pm

I will share a data point here for Employee Fiduciary - who allows Mega Backdoor Roth in their custom solo 401(k) per the salesperson I'm in contact with. Their fee schedule per my understanding for their custom, Mega Backdoor Roth-enabled Solo 401(k)s is:

1. $500 one-time establishment fee for new plan documents
2. $500 annual base administration fee (billed quarterly at $125), includes all recordkeeping and TPA services for eligible owner(s) and hired spouse(s)
3. 0.08% annual asset management fee (billed quarterly at 0.02%) covers the custodial and directed trustee services provided by Matrix Trust Company, and is based on the total plan balance as of the last day of the preceding calendar quarter
4. Plus other fees for various other things like distributions/loans/amendments/etc.

Could be a reasonable option if you are looking for TPA here? I know they are who I'm taking a hard look at for our solo 401(k) right now.

Best, ICM

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