I think this is true in general for all accounts, but it is especially true for solo 401k's: do not trust what customer service reps tell you when it comes to 401k-specific details. Providers can and have given incorrect information, according to boglehead posts. I don't know if we've ever seen a case of someone actually getting hit with a penalty for following their advice, but in some ways that can be scarier, because nobody tells if you if you screwed up. The late fees for 5500-EZ do actually happen, though, you really need to not forget about that one. Some providers will give you reminders, but you shouldn't rely on it.1. You are the plan administrator. Don’t expect tax and other advice from the plan provider. If they do provide advice, doublecheck its accuracy.—What else should I know about setting up and maintaining such a plan?
Note that if you go looking around on bogleheads for info, even some people on here have done things clearly against the rules without realizing it (multiple plans for the same company, trying to use multiple providers for a plan, etc). Don't assume that something is okay just because people did it here.
Practically speaking, you don't really need to worry about all of the details if you keep things pretty simple: just do normal employer/employee contributions within the limits, and don't withdraw anything until you hit retirement age. No loans, no early withdrawals, no in-service rollovers, stay with the same provider the whole time, and things stay very simple.
My least favorite part is moving to a new provider. I would suggest trying to avoid that, but it can be required if your provider gets bought out or sells the solo 401k business, or just stops supporting that type of account. That seems like it shouldn't happen very often, but it's happened to me twice!
Try to pick a provider you think won't kick you out. My best guess right now would be Fidelity, but clearly I'm not good at picking these.One more bit of info I see people get confused by:
The "plan" is something that exists outside of the accounts you open at whatever provider. That is, you control the "Hot Sauce Solo 401k Plan", as the employer. Even though you're using Fidelity's prototype plan (or Schwab's, or a plan that mysolo401k gives you), and that dictates the fine print details of what the plan allows, you are the one that decides that the "Hot Sauce Solo 401k Plan" is using that provider's plan documents. Conceptually it's very different from a normal brokerage or IRA account, but it looks very similar to one of those accounts if you just kind of ignore all the rules (which a lot of people do!).
Statistics: Posted by numberman — Sun Sep 08, 2024 12:57 am — Replies 7 — Views 324