Vanguard solo 401k to allow incoming rollovers?!

[neurosphere]

A physician colleague of mine at work is opening a solo 401k, and researched Fidelty and Vanguard, and she just sent me this email:

"VG said to wait until the end of February. They [negotiated with] the IRS and will be able to rollover [my SEP IRA and rollover IRA] to this solo-401k after new changes around early March."

If true, this is good new for those who would prefer to have their solo 401ks at VG and have need for incoming rollovers, which current plans do not allow. Very curious what will happen to existing 401ks, and if there will be a mechanism to change/modify/transfer/close-and-reopen/whatever the plans to allow incoming rollovers without too much administrative hassle.

[crystalbank]

Wow, big news if this happens. Also terrible timing since I'm in the process of moving my Solo 401k away from Vanguard.

[jameskay]

Thank you very much for sharing this info, neurosphere. I have had it on to do list to move my solo 401K out of vanguard to switch it to etrade since the latter allows rollovers. That in turn would allow me to rollover IRAs into the solo 401k to enable tax free backdoor roths, and also in general to consolidate too many separate retirement accounts DW and I have accumulated over the years. Your news gives enough hope that it is worth waiting a few more weeks to avoid hassle. Let's hope it comes to fruition.

I know nothing about such things, but is it credible that "lack of completion of negotiation with IRS" is what has stopped them from having this feature till now? E-Trade and others like mysolo401k.net negotiated successfully years ago, but Vanguard could not?

[nepats]

Thanks! I was hoping for this and will help to further consolidate.

[neurosphere]

Thank you very much for sharing this info, neurosphere. I have had it on to do list to move my solo 401K out of vanguard to switch it to etrade since the latter allows rollovers. That in turn would allow me to rollover IRAs into the solo 401k to enable tax free backdoor roths, and also in general to consolidate too many separate retirement accounts DW and I have accumulated over the years. Your news gives enough hope that it is worth waiting a few more weeks to avoid hassle. Let's hope it comes to fruition.

I know nothing about such things, but is it credible that "lack of completion of negotiation with IRS" is what has stopped them from having this feature till now? E-Trade and others like mysolo401k.net negotiated successfully years ago, but Vanguard could not?

"Negotiation" is a poor word choice from someone that didn't understand how this works in the background. Here's a very simplified way to think about it. Fidelity, Vanguard, etc offer "off the shelf" solo 401ks. That is, they obtain pre-approval from the IRS to create a product with certain rules/features/etc and then offer than identical product to all. This can be a long and/or costly process to get this approval. Vanguard's plan, for whatever reason (likely simplicity at the time it was created) does not allow for incoming rollovers. In order to create a new solo 401k option that HAS this feature, they have to create an entirely new "application" of sorts to the IRS to get pre-approval for what's essentially a brand new plan. This can take a lot of work, and there has to be a good business reason to go through the effort.

Note that each feature is likely to increase the cost to Vanguard of offering a solo 401k. For example, processing income rollovers may cost more than the extra management fees the incoming rollover provides. Vanguard will have to pass this cost along to customers in some way. On the other hand, it's possible that on average processing the rollovers might be cost neutral or a cost savings. I have no idea. But each new feature/option/element in their new 401k plan will have a new cost, and that cost may or may not be offset by new business/assets.

[MexiPino]

[merged into existing thread - moderator prudent]

Not sure if this was posted already, but just called Vanguard and they are allowing tIRA rollovers into Solo 401k accounts now. The change literally happened today and they said they would be sending out the new documents early next week.

My tIRA is with Vanguard and I was gonna open my Solo 401k at E-Trade because Vanguard didn't allow rollovers, but now that they do I'm just gonna stay with them.

[White Coat Investor]

About freaking time. Great news though.

[roth evangelist]

This is fantastic. Really makes Vanguard a no-brainer now as a choice for solo 401(k).

[WorkToLive]

But still no mega back door Roth possibility at Vanguard Solo 401k, rights?

[Tamarind]

This is marvelous news. I can finally move my former employer 401k! It's been sitting there because new 401k has higher admin fees and I'm on the cusp of needing backdoor Roth so didn't want a tIRA.

[Kookaburra]

Do Vanguard solo 401ks also have a Roth? It would be great if they allow tIRA roll-ins and have a Roth!

[Tamarind]

Do Vanguard solo 401ks also have a Roth? It would be great if they allow tIRA roll-ins and have a Roth!

They do have a Roth option but I don't think they allow in-service conversions. The pre-tax money you roll in would stay pre-tax.

[Kookaburra]

With this feature, Vanguard has just jumped ahead of Fidelity in terms of attractiveness of their solo401k. Hopefully this puts some pressure on Fidelity to finally get a Roth option in their solo 401k offering.

[jameskay]

I have an existing Vanguard Solo 401K, and I'd like to do rollovers into it from Vanguard-held Rollover IRAs and also from external 401Ks.
The vanguard personal website still doesnt let me exchange from Rollover IRA into Solo 401k, it says "Exchanging money between these accounts isn't permitted." Does anyone know if I first have to amend my plan? Or does this have to be done over phone? I did secure mail Vanguard the same question on 20-FEB, and havent gotten a response yet, so wanted to check if other BH already know the steps on how to do this...

[HomeStretch]

You likely have to call so Vanguard can properly code the rollover into the 401k. At least that’s how it worked with Fidelity’s “non-employer retirement plan group” (it’s not an online process).

[Tamarind]

I don't think they they support it quite yet, based on the info people mention getting from support. May be a few more weeks wait.

[langelgjm]

I recently closed my Solo 401k with Vanguard, as the amount in it wasn't worth the hassle of an additional account, and I was unlikely to add to it in the future.

For those who intend to roll over substantial balances, keep in mind the Form 5500 filing thresholds.

Also, does Vanguard still not offer Admiral shares in these accounts?

[Tamarind]

I recently closed my Solo 401k with Vanguard, as the amount in it wasn't worth the hassle of an additional account, and I was unlikely to add to it in the future.

For those who intend to roll over substantial balances, keep in mind the Form 5500 filing thresholds.

Also, does Vanguard still not offer Admiral shares in these accounts?

They do offer Admiral shares now.

[Tamarind]

I have an existing Vanguard Solo 401K, and I'd like to do rollovers into it from Vanguard-held Rollover IRAs and also from external 401Ks.
The vanguard personal website still doesnt let me exchange from Rollover IRA into Solo 401k, it says "Exchanging money between these accounts isn't permitted." Does anyone know if I first have to amend my plan? Or does this have to be done over phone? I did secure mail Vanguard the same question on 20-FEB, and havent gotten a response yet, so wanted to check if other BH already know the steps on how to do this...

Did you ever hear back? I got a classic Vanguard response, basically "We don't allow any incoming rollovers. If that changes we'll announce it."

[FinanceIsFun(ds)]

I'm very interested in this. Any update is appreciated.

[nungjames]

I spoke to them today about this.
The rep I spoke to said yes they were now accepting rollovers. I asked in the context of creating space for a backdoor roth.
The rep also said while the paperwork was now allowing it, the system itself might take a week or two to be ready.
The rep offered to get back in touch once the system was updated.
So we'll see what happens...

[neurosphere]

I spoke to them today about this.
The rep I spoke to said yes they were now accepting rollovers. I asked in the context of creating space for a backdoor roth.
The rep also said while the paperwork was now allowing it, the system itself might take a week or two to be ready.
The rep offered to get back in touch once the system was updated.
So we'll see what happens...

So it seems your impression was that EXISTING 401ks would be changed to now allow incoming rollovers? As opposed to something that would be applied to new solo 401ks?

Somehow it would seem that such a change might require the participants to sign a new agreement, as this is change to the plan? It's somewhat different than (for example) allowing admiral shares vs regular shares. But really, I'm just guessing. I don't really know how these things work.

[Tamarind]

I spoke to them today about this.
The rep I spoke to said yes they were now accepting rollovers. I asked in the context of creating space for a backdoor roth.
The rep also said while the paperwork was now allowing it, the system itself might take a week or two to be ready.
The rep offered to get back in touch once the system was updated.
So we'll see what happens...

So it seems your impression was that EXISTING 401ks would be changed to now allow incoming rollovers? As opposed to something that would be applied to new solo 401ks?

Somehow it would seem that such a change might require the participants to sign a new agreement, as this is change to the plan? It's somewhat different than (for example) allowing admiral shares vs regular shares. But really, I'm just guessing. I don't really know how these things work.

I'm pretty sure we'd have to amend the plans to allow this. But first Vanguard would need to have the new boilerplate plan ready.

[nungjames]

To clarify: I was asking about setting up a new individual 401k

[cookiemonstera]

Called today and the retirement account rep said they are not allowing rollovers from IRAs to solo401k, and no idea when they would ever happen. No idea who to believe now...

[paulsalem]

Unfortunately they don't allow loans if that's important to you.

[jameskay]

I have an existing Vanguard Solo 401K, and I'd like to do rollovers into it from Vanguard-held Rollover IRAs and also from external 401Ks.
The vanguard personal website still doesnt let me exchange from Rollover IRA into Solo 401k, it says "Exchanging money between these accounts isn't permitted." Does anyone know if I first have to amend my plan? Or does this have to be done over phone? I did secure mail Vanguard the same question on 20-FEB, and havent gotten a response yet, so wanted to check if other BH already know the steps on how to do this...

Did you ever hear back? I got a classic Vanguard response, basically "We don't allow any incoming rollovers. If that changes we'll announce it."

I got a response to my 20-FEB secure mail on 01-MAR from a Small Business specialist at Vanguard telling me that they'll phone me on 08-MAR and work on my rollover with me. It remains to be seen whether they'll tell me I have to amend my plan or actually complete the rollover. I will post again after 08-MAR.

[jameskay]

Vanguard rep was a no show for the appointment they scheduled with me, but I later got a secured message telling me they will let me know when the process for the rollover is available. I think their service is struggling and/or they are working extra hard to keep our costs low

[SuperXmas]

I called this AM. One guy said they are accepting but I need to initiate with ML. That’s unusual so I called back and the second rep said to sit tight bc they won’t be ready to accept rollovers for another couple weeks. Seems like it’s coming but not quite ready.

[nepats]

I don't see any updates on this yet. The website hasn't changed and lacks any options to initiate a rollover online.

[mstrcvdstr]

Vanguard Individual 401K will accept a roll over from an existing 401K. My company closed their 401K last month. I rolled over my entire employment 401K into my Individual 401K. I had to call Vanguard and talk to a Small Business Specialist. I believe I was their first rollover of this kind. Went very smoothly. Everything was done electronically except the mailing of the check.

[nepats]

Everything was done electronically except the mailing of the check.

Thanks for the info. Why not electronic direct funds transfer? Is that a limitation of Vanguard?

[mstrcvdstr]

Everything was done electronically except the mailing of the check.


Thanks for the info. Why not electronic direct funds transfer? Is that a limitation of Vanguard?


Limitation of old 401K

[EnjoyIt]

Good to hear, but a little too late. I just moved my 401k to E*TRADE a few months back for this exact reason. It’s a shame because I would prefer to have stayed with Vanguard but I guess the E*TRADE signup bonus was pretty nice as well.

[aaron239]

FYI, we are working on a rollover into one of our Vanguard solo 401ks now. The first step is updating the plan documents, as was suggested above, to allow for the rollover. After the new plan documents are completed, we are able to rollover the balance as normal. I'll post here once we have more progress.