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Asked 7/26/2007

Question about the Solo 401 K Retirement Plan for Self-Employed?

I have run a consulting business full-time for the past five years. I now want to accept a great opportuntiy to take a full-time job that requires me to shut down my business. In fact, a client wants me to go with them full-time. Can I still maintain my Solo 401 K even after self-employment ends? In other words, can I still access the self-loan component? Can I still rollover the proceeds from my previous 401K into one larger Solo 401 K account after I end self-employment? Those are the two biggest benefits of the Solo 401K that I'd like to continue. Thank you.

 
 
 
 
 
 
Answers

Answer 1/1 - Submitted 7/26/2007

To answer your first question, the solo 401(k) is a qualified plan. The contributions are based on a percentage of self-employment income. If you are no longer earning income as a consultant, no further contributions can be made. You can, however, leave the money in the plan to grow tax-deferred.
The loan provision is still in effect and you would be able to borrow up to 50% of the balance if it's less than $50,000 (I'm pretty sure about that limit, but you can check with your plan administrator).

I'm not sure I understand the question about the rollover. You say "previous 401k into one larger Solo 401k" after you end self-employment. I know you would be able to roll your Solo 401(k) into your new 401(k) plan at your previous client's company. I'm not sure about vice versa since you would technically be "separated from service".

Check with your plan administrator for confirmation on all the details. They will be able to answer the questions more in depth.

Ron, ChFC

 
 
 
 

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