Self Directed Solo 401k
Introduction to the Solo 401k
The Solo 401(k) plan is a retirement plan for self-employed
individuals, sole proprietors or partners in business with zero
employees or employees who work less than 1,000 hours per
Key Benefits of the Solo 401k year. Spousal employees are an exception.
High Contribution Allowance
Ability to Take a Loan from the Plan
Eligibility for the Solo 401k Open Architecture for Unlimited Investment Options
No Custodian Required to Operate the Plan
Limited Responsibilities for the Plan Owner
Not Subject to UDFI or UBIT (For Leveraged
Investments)
Contribution Allowances Solo 401(k) will support three types of employer and
employee contribution sources: individual employee
salary deferral contributions (pre-tax money),
employer contributions (tax deductible to the
employer), and Roth salary deferral contributions
(post-tax money).
Total annual contributions for the 2010 tax year are
limited to $49,000 per account ($54,500 if age 50 or
over) to the Solo 401(k) or the Individual Roth 401(k)
account. This limit is a combination of employee and
employer contributions. Even if you have both types
of accounts, you may not contribute more than the
maximum.
For the 2010 tax year, employees can make total salary
deferral contributions of $16,500 and an additional $5,500 if
they are 50 or over to the Individual 401(k) or the Solo Roth
401(k) account. Even if you have both types of accounts, you
may not contribute more than the maximum.
Loan Capabilities • To be repaid over an amortization
schedule of 5 years or less
A participant can borrow up • Regular payments no less frequently
to either $50,000 or 50% of than quarterly
account value, whichever is less. • At a reasonable rate of interest…
generally interpreted as prime rate +
1%
Unlimited Investment Capabilities Owners of the plan can direct investments with
their own discretion accompanied by formal record
keeping compliance and in accordance with the
prohibited transaction rules of the IRS.
The Innovant Solo 401(k) is a self administered,
self trustee plan allowing the owner to hold assets
directly, not requiring a custodian for purposes
other than accepting direct rollovers/transfers and
holding securities or equities which the plan owner
would not be able to hold or trade themselves.
No Custodian Required The concept of custodian comes from Internal Revenue
Code Section 408(a)(2) and is defined in Section
408(n). This entire IRC section 408 is devoted to
Individual Retirement Accounts, or IRAs. The code
explains that an IRA is typically a trust, and the trustee
must be a bank. The code defines a “bank” as a bank,
trust company, or any company specifically approved
by the IRS. This capacity of trustee to an IRA is known
as “custodian”. This trustee role is simply that of
investing the plan as directed by the accountholder.
All 401(k) plans are qualified plans, and qualified plans
do not have any special restrictions on who can serve
as trustee. The Solo 401(k) plan allows the owner to
play the role of employer, employee, plan participant,
plan administrator, and plan trustee.
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There is no unique risk of legal noncompliance that
would otherwise be eliminated by using a custodian for
a Solo 401(k). Avoiding unnecessary fees imposed by
custodians for services that aren’t required, adds
immediate value to the assets held in a retirement plan.
The major special risk involved is avoiding prohibited
transactions. The Innovant Group offers ongoing
guidance and support to help clients avoid prohibited
transactions and non-compliance by extending our vast
resources and knowledgeable staff of seasoned
financial advisors.
Duties of the Administrator • Filing form 5500 annually when plan
assets exceed $250,000
& Trustee • Avoiding prohibited transactions stated
in the 408 tax code
INNOVANT Group’s Our mission is to remove the guess work
from self directed investing making it a
Duties & Responsibilities seamless, convenient experience for our
clientele. We have conducted arduous
due diligence in identifying and creating
the most cost effective and efficient
structure for our clients to utilize the Solo
401(k) for their self directed needs. In
conjunction with Plan Practitioners and
nationally recognized Custodians we
create 401k plan documents , provide
plan document updates necessary to
keep the plan in compliance with tax
laws as they change, paired with the set
up of a non-prototype Solo 401(k)
account at Fidelity to accept
rollovers/transfers and hold plan assets .
These accounts come with check writing
ability to fund future investments with
ease.
To make this a full service experience, we
provide ongoing support to assist with
future contributions, asset transfers or
account consolidations with constant
oversight throughout the account
opening process. Integral to the
experience, The Innovant Group provides
perpetual consultations to clients who
may have questions encompassing
prohibited transactions, business entity
structures and administrative questions.
INNOVANT GROUP
101 California St. Ste. 2450
San Francisco, CA 94111
innovantgroup.com I 415.888.8640