Dec 30

Looking For a 401k Plan Record Keeper?

Let our ERISA Experts take care of your retirement plan so you can focus on what really matters – your business

Work directly with our ERISA attorneys and Experts to establish and maintain your company’s 401(k) retirement or profit sharing plan. Our ERISA attorneys and 401(k) experts have the training and experience to take care of all your retirement plans recordkeeping and administration services so that you retirement plan remains ERISA compliant.

The Difference

Unlike other 401(k) plan recordkeeping service providers, our 401(k) plan services include an IRS pre-approved retirement plan fully customizable and are not tied to any one financial institution or financial investment program. You control which investments are offered and have total control over all plan options while our ERISA experts handle all recordkeeping responsibilities and requirements.

 

401k Administration Services
Other 401(k) Providers
Focused on small businesses with less than 50 employees
Yes No
IRS-approved prototype plan documents are provided
Yes No
Customized 401(k) Plan
Yes No
Trustee Directed 401(k) Plan
Yes No
Open account at any financial institution
Yes No
Freedom to select Investment provider
Yes No
Freedom to select investment options
Yes No
Receive no compensation from investment providers
Yes No
Purchase Qualifying Employer Securities
Yes No
Ability to Adopt pure profit sharing plan
Yes Only In some cases
Loan feature
Yes Only In some cases
Plan establishment and recordkeeping services
Yes Only In some cases
Payroll and plan integration
Yes Only In some cases
ERISA compliance testing
Yes Only In some cases
Any required non-discrimination testing for the plan
Yes Only In some cases
Completion of IRS Form 5500
Yes Only In some cases
Low cost flexible pricing options
Yes No
The all in one 401(k) retirement solution provider and Record keeper
Yes No

Let’s us take care of your Retirement Plan so that you can take care of your business!

Contact one of our Retirement Experts today @ 800.401.5762 to learn more.

Dec 27

IRA Financial Group Introduces Year-End Solo 401(k) Plan Guarantee for all Solo 401(k) Plan Clients Getting Started by December 31, 2013

Solo 401(k) Plan must be established prior to December 31 2013 to be eligible for 2013 taxable year

IRA Financial Group, the leading provider of “checkbook control” self-directed IRA and solo 401(k) plan solutions, announces a new year-end solo 401(k) plan deadline expediting service for all new individual 401(k) Plan clients seeking to establish a plan for the 2013 taxable year. In order to make employee deferral and employer profit sharing contributions to a 401(k) qualified retirement plan, the plan must be established in the tax year for which the contribution will relate. Thus, if one wishes to make a tax-deductible or Roth 401(k) plan contribution for the 2013 taxable year, the self-directed solo 401(k) plan must be established by December 31, 2013. “In order to accommodate the enormous demand from self-employed individuals and small business owners for our self-directed solo 401(k) Plan, IRA Financial Group has expanded its services with a deadline expediting service, “ stated Susan Glass, a 401(k) plan tax specialist with the IRA Financial Group. “IRA Financial Group guarantees that any individual seeking to adopt a solo 401(k) Plan as late as December 31, 2013 for the 2013 taxable year, will have their plan established in time to take make 2013 plan contributions, “ stated Ms. Glass.

In general, the deadline for making Solo 401K Plan contributions is typically dependent on the type of entity that has adopted the Solo 401(k) Plan as well as the type of contribution – employee deferral vs. profit sharing contribution.

IRA Financial Group Introduces Year-End Solo 401(k) Plan Guarantee for all Solo 401(k) Plan Clients Getting Started by December 31, 2013 The annual Solo 401k contribution consists of 2 parts, an employee salary deferral contribution and an employer profit sharing contribution. In 2012 the total contribution limit for a Solo 401k is $50,000 or $55,500 if age 50 or older. The total allowable contribution limits are combined to get the maximum solo 401(k) Plan contribution limit.

Under the 2013 new Solo 401k rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,500. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $51,000.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $23,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $56,500.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading self-directed solo 401k plan provider. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.  Be sure to like us on Facebook and follow us on Twitter!

Dec 26

401k Resolutions You Should Make

The end of the year is approaching fast!  So, while you are making your New Year’s resolutions, don’t forget about your finances.  Here are some things to consider to resolve in regards to your 401(k) plan.

Obviously, the most important thing is to save for retirement.  The easiest way to do that is to set up direct deposit.  When you don’t need to think about saving for retirement, it’s much easier on your wallet.  If you don’t have a 401(k) plan available at work, you can save the same way with an IRA.

Year end checklist for your 401(k) plan.We always stress to contribute enough to your 401(k) to receive your full employer match (if your employer has one).  A typical match is 50% up to 6% of your annual salary.  For example, someone earning $40,000 per year needs to contribute $4,800 to receive the full match of $2,400.  This is the best return you’ll ever see on your money.

Not to be forgotten is the tax advantages of saving with a traditional 401(k).  Any contribution you make is not taxed during the year you make them.  This lessens your earned income which decreases your tax bill for the year.  Further, you may qualify for the saver’s tax credit if your income is low enough.

Next, look to diversify your tax implications.  Roth 401(k) plans allow you to pay the taxes now on contributions in favor of tax-free distributions during retirement.  Again, if your employer doesn’t offer this option, you can always fund a Roth IRA.  Another benefit of the Roth is there are no required minimum distributions later on in life.  Therefore, if you don’t need the money yourself, you can leave it to your heirs.

It’s been a mostly up year for the markets so your portfolio might not be aligned with your investment strategy and goals.  Any swings in the market can switch your asset allocation, therefore exposing you to more (or less) risk than you want.  Make sure you are invested in exactly what you want.  Be sure you have some percentage in different asset classes along with international funds.

Lastly, if you’ve had any self-employment work, you can look to open a Solo 401(k) plan to further save for retirement.  Act fast though, since you have until the end of the year to set one up and contribute for 2013!

For more resolutions for your retirement saving, check out this article.

If you have any questions, please contact a 401(k) Expert at the IRA Financial Group @ 800.472.0646 before it’s too late!

Dec 23

Recent IRS Guidance on in-Plan Roth Solo 401(k) Plan Rollovers Impacting Solo 401(k) Plan Owners

IRS Notice 2013-74 offers guidance to solo 401(k) Plan owners on deadlines for adopting in-plan Roth rollover amendment

The IRS on December 12, 2013 issued guidance in IRS Notice 2013-74 to qualified retirement plans, including the solo 401(k) plan, on in-plan rollovers to designated Roth Solo 401K accounts. The guidance in IRS Notice 2013-4 relates to the expansion of such rollovers under the American Taxpayer Relief Act of 2012. The notice also provides guidance that applies to all in-plan Roth rollovers described in Section 402A(c)(4) of the Tax Code.

Recent IRS Guidance on in-Plan Roth Solo 401(k) Plan Rollovers Impacting Solo 401(k) Plan OwnersSection 402A of the Tax Code sets out the rules for designated Roth Solo 401k contributions. A qualified distribution from an employee’s designated Roth account is excludable from gross income. Section 402A(c)(4)(E) provides that a plan with a designated Roth account can permit an in-plan Roth rollover of an amount not otherwise distributable under the plan. “One of the most important aspects of Notice 2013-74 is that it offers guidance on how the in-plan Roth rollover process works,“ stated Adam Bergman, a tax advisor with the IRA Financial Group. According to Mr. Bergman, the Notice clarifies that once can convert pre-tax 401(k) plan funds to a Roth after-tax account even if the funds were not available for distribution – no triggering event existed.

Notice 2013-74 clarifies that an amount rolled over to an individual’s designated Roth account pursuant to an in-plan Roth rollover remains subject to the plan’s distribution restrictions otherwise applicable to that amount before the in-plan Roth rollover. The deadline for adopting an amendment providing for in-plan Roth rollovers is the later of the last day of the first plan year for which the amendment is effective or December 31, 2014, provided the amendment is effective as of the date the plan first operates in accordance with the amendment. “Notice 2013-74 is so important to businesses that have established solo 401(k) plans because it allows them an extra year to adopt an amendment allowing for the in-plan Roth rollover feature,“ stated Mr. Bergman. “The IRS was expected to provide 401(k) plan sponsors with approved plan in-plan Roth amendments in the 2013 taxable year but it never occurred so Notice 2013-74 is essence bought the IRS an extra year to approve the necessary plan amendments,” stated Mr. Bergman.

This extended deadline also applies to plan amendments that allow for elective deferrals under the plan to be designated as Roth contributions, allow for the acceptance of rollover contributions by designated Roth accounts, or permit in-plan Roth rollovers of some or all otherwise distributable amounts.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading provider of IRS approved self-directed individual 401(k) plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.  Be sure to check us out on Facebook and Twitter!

Dec 20

Making an Investment With a Loan From Your Solo 401k

When it comes to using retirement funds, such as a Solo 401K Plan, to make investments, the question arises whether a Solo 401K Plan can utilize a loan as part of the transaction.

Use a loan from your Solo 401(k) to make an investmentThe IRS has always allowed a Solo 401K Plan to make traditional as well as non-traditional investments such as real estate. However, the prohibited transaction rules under Internal Revenue Code Section 4975 restrict a Solo 401(k) Plan participant from engaging in certain transactions – prohibited transactions. Under IRC 4975, one of the categories of prohibited transactions involve a disqualified person personally guaranteeing a loan made to a Solo 401K Plan. A Solo 401K plan participant is treated as a disqualified person pursuant to IRC 4975. As a result, a Solo 401K, also known as an Individual 401K or Self Directed 401K Plan, cannot use a recourse loan to purchase property owned by a Plan because a disqualified person (Solo 401K Plan participant) cannot personally guarantee a loan. However, the IRS does allow for the 401K to use a nonrecourse loan to purchase real estate. A nonrecourse loan is a loan that does not require a personal guarantee on the part of the Solo 401K plan participant. In other words, a loan that would limit a lender’s (bank) ability to go after an individual personally for non-payment of the loan. Instead, the lender’s sole remedy would be to look to the underlying property as satisfaction of the loan. Of course, this type of loan is more difficult to acquire and can be more expensive for a borrower.

In general, Internal Revenue Code Section 514(c)(9) permits a few types of exempt organizations to make debt-financed investments in real property without becoming taxable under Code Section 514. Note – the exemption only applies to real estate and not to other types of nonrecourse financing, such as margin on stock.

The Section 514 exemption applies to any “qualified organization,” a term that includes (1) schools, colleges, universities, and their “affiliated support organizations,” (2) qualified pension, profit sharing, and stock bonus trusts, and (3) title holding companies exempt under § 501(c)(25). In general, indebtedness incurred by a qualified organization in acquiring or improving real property is not acquisition indebtedness if the transaction navigates through a long list of prohibitions. In other words, a Solo 401K Plan can use nonrecourse leverage when purchasing real property with Plan assets and not be subject to the Unrelated Debt-Financed Income rules, which in-turn trigger an Unrelated Business Taxable Income (UBTI or UBIT) tax (approximately 35%). Note – only nonrecourse leverage can be used when acquiring property by a 401K or Solo 401K Plan since, a disqualified person (401(k) plan participant or trustee) cannot personally guarantee the loan (recourse loan) since that would violate the prohibited transaction rules pursuant to Internal Revenue Code Section 4975. It is important to remember that this exemption would not apply to an IRA since an IRA is not a qualified pension, profit sharing, and stock bonus trusts.

To satisfy the exemption under Internal Revenue Code Section 514, the price paid by the organization for the property or improvement must be fixed when the property is acquired or the improvement is completed, neither the amount nor the due date of any payment under the indebtedness can be contingent on the revenue, income, or profits from the property, and the property may not be leased to the person who sold the property to the organization or to any person related to the seller within the meaning of Code Section 267(b) or Code Section 707(b). If the organization is a qualified pension, profit sharing, or stock bonus trust, the property may not be purchased from or leased to the employer of any of the employees covered by the trust or any one of several persons related to the employer. Financing for the property may not be received from the person who sold the property to the organization, a person related to the seller within the meaning of Code Section 267(b) or Code Section 707(b), or, if the organization is a qualified employee trust, an employer or related person who is disqualified from being seller or lessee under the rule described in the preceding sentence. The property must usually be owned directly by the qualified organization, except that an interest in a partnership or other pass-through entity qualifies if all of the partners or other owners are qualified organizations and each partner or other owner is allocated the same distributive share of every item of partnership income, deduction, and credit.

When § 514(c)(9) was enacted in 1980, it applied only to qualified pension, profit sharing, and stock bonus plans, but its scope was broadened in 1984 to include schools, colleges, and universities.

Many people ask why this exemption only applies to 401K Plans and not IRAs. The only reason given in the committee reports for the exemption is that some people wanted it: “Trustees of these plans are desirous of investing in real estate for diversification and to offset inflation. Debt-financing is common in real estate investments.”  The provision was originally limited to qualified employee trusts on the theory that the income would eventually be taxed to employees and their beneficiaries.

To learn more about the rules surrounding using a loan with a Solo 401K Plan to make an investment please contact a Solo 401K Expert from the IRA Financial Group at 800-472-0646.

Dec 19

IRA Financial Group to Offer Special Solo 401(k) Plan Year-End Tax Advisory Service For All Self-Directed 401(k) Retirement Clients

Special year-end solo 401(k) plan tax advisory service will cover all elements of the individual 401(K) Plan

IRA Financial Group, the leading provider of IRS compliant solo 401(k) Plans, announces the offering of a year-end tax advisory service to be offered for no additional charge to all current self-directed solo 401(k) plan clients. The new year-end tax advisory service will be offered to all IRA Financial Group clients in order to provide a comprehensive and customized tax review of each individual client’s retirement goals in order to maximize their retirement benefits. “We are excited to offer this year-end solo 401(k) tax advisory service that will cover all tax aspects of the solo 401(k) Plan to all our self-directed retirement clients, “ stated Susan Glass, a tax professional with the IRA Financial Group.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP. Each person looking to start a solo 401(k) Plan will be offered the chance to receive a free tax consultation with a retirement tax specialist in order to explore the most tax advantageous year-end tax planning opportunities.

IRA Financial Group to Offer Special Solo 401(k) Plan Year-End Tax Advisory Service For All Self-Directed 401(k) Retirement Clients A solo 401K Plan offers a self employed business owner the ability to use retirement funds to make almost any type of investment, including real estate, tax liens, private businesses, precious metals, and foreign currency on their own without requiring custodian consent tax-free! In addition, an individual 401K Plan will allow a plan participant the ability to make high contribution limits (up to $56,500) as well as borrow up to $50,000 for any purpose. In order to make annual tax deductible or after-tax contributions, the solo 401(k) Plan has to be established prior to December 31. Accordingly, it is very common for small business owners with no employees to start focusing on year-end tax planning towards the end of the year. “We are excited about providing a platform to help small business owners determine the most tax efficient retirement solution based on each individual’s financial, retirement, and investment needs,” stated Ms. Glass.

IRA Financial Group will take care of setting up the entire self directed 401k Plan. The whole process can be handled by phone, email, fax, or mail and typically can be done in 24-48 hours. Our self-directed 401k plan experts are on site greatly reducing the set-up time and cost.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

Dec 18

Why You Should Contribute to a Roth Solo 401(k) Plan

The Roth Solo 401K Plan is the ultimate tax-free retirement solution for the self-employed. With federal and state income tax rates expected to increase in the future, gaining the ability to generate tax-free returns from your retirement investments when you retire is the last surviving legal tax shelter. With a Roth Solo 401K you can make almost any investment tax-free, including real estate, tax liens, precious metals, currencies, options, and private business investments and once you hit the age of 59 1/2 you will be able to live off your Roth 401K assets without ever paying tax. Imagine if someone told you that if you started making Roth 401K contributions in your forties and by just generating a modest rate of return, you could have over a million dollars tax-free when you retire. With a Roth 401K, live off the Roth 401K investment income tax-free or take a portion of your Roth 401K funds and use it for any purpose without ever paying tax.

The Roth Solo 401K Plan Advantages

High Contributions: A Roth Solo 401(k) combines features of the traditional 401(k) with those of the Roth IRA. Like a Solo 401K Plan, the Roth Solo 401K Plan is perfect for any self-employed individual or small business owner with no employees. The Roth Solo 401K Plan contains the same advantages of a Solo 401(k) Plan, but as with a Roth IRA, contributions are made with after-tax dollars. While you don’t get an upfront tax-deduction, the Roth 401K account grows tax-free, and withdrawals taken during retirement aren’t subject to income tax, provided you’re at least 59 1/2 and you’ve held the account for five years or more.

The Roth Solo 401K Plan is the ultimate tax-free retirement solution for the self-employed.The Roth Solo 401(k) can offer advantages to self-employed individuals who wish to maximize their ability to generate tax-free retirement savings while receiving the ability to invest in real estate, precious metals, private businesses or funds tax-free and without custodian consent.

Unlike a Roth IRA, which limits individual Roth IRA contributions to $5,500 annually ($6,500 if the individual is 50 years or older), in 2012, with a Roth Solo 401(k) account, an individual can make Roth (after-tax) contributions of up to $17,000, or $22,500 for those 50 or older by the end of the year — allowing individuals to stock away thousands of dollars more in tax-free retirement income than they would through a Roth IRA.

A Roth Solo 401(k) is perfect for sole proprietors, small businesses and independent contractors such as consultants. The Roth Solo 401(k) plan is unique and so popular because it is considered the last remaining legal tax shelter available. There are so many features of the Roth Solo 401(k) plan that make it so appealing and popular among self-employed business owners.

Unlimited Investment Opportunities: With a Roth 401(k) Plan or Roth 401(k) plan sub-account, you can invest your after-tax Roth 401(k) Plan funds in real estate, precious metals, tax liens, private business investments, and much more tax-free! Unlike with a pre-tax 401(k) Plan, with a Roth 401(k) account, all income and gains would flow back tax-free to your account. As long as you have reached the age of 59 1/2 and have had the Roth 401(k) account opened at least five years, you can take Roth 401(k) Plan distributions tax-free. In other words, you can live off your Roth 401(k) Plan assets or income tax-free. With federal income tax rates expected increase, the ability to have a tax-free source of income upon retirement may be the difference between retiring early or not.

Loan Feature: While an IRA offers no participant loan feature, the Roth Solo 401k allows participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose at a low interest rate (the lowest interest rate is Prime which is 3.25% as of August 1, 2013). This offers a Roth Solo 401(k) Plan participant the ability to access up to $50,000 to use for any purpose, including paying personal debt or funding a business.

Offset the Cost of Your Plan with a Tax Deduction: By paying for your Solo 401(k) with business funds, you would be eligible to claim a deduction for the cost of the plan, including annual maintenance fees. The deduction for the cost associated with the Solo 401(k) Plan and ongoing maintenance will help reduce your business’s income tax liability, which will in-turn offset the cost of adopting a self-directed Solo 401(k) Plan. The retirement tax professionals at the IRA Financial Group will help you take advantage of the available business tax deduction for adopting a Solo 401(k) Plan.

Cost Effective Administration: In general, the Roth solo 401(k) plan is easy to operate. There is generally no annual filing requirement unless your solo 401(k) plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ).

Exemption from UDFI: When an IRA buys real estate that is leveraged with mortgage financing, it creates Unrelated Debt Financed Income (“UDFI”) – a type of Unrelated Business Taxable Income (also known as “UBTI or UBT”) on which taxes must be paid. The UBTI tax is approximately 35%. Whereas, with a Roth Solo 401(k) plan, you can use leverage without being subject to the UDFI rules and UBTI tax. This exemption provides significant tax advantages for using a Roth Solo 401(k) Plan versus an IRA to purchase real estate.

To learn more about the Roth Solo 401(k) Plan, please contact a tax expert from the IRA Financial Group at 800-472-0646.

Dec 16

IRA Financial Group Introduces Year-End Guarantee Set-Up for the Self-Directed Solo 401(k) Plan

Set-up a Solo 401(k) Plan before December 31 to take advantage of up to $56,500 in tax savings

IRA Financial Group, the leading provider of self-directed solo 401(k) retirement plans, introduces a special year-end guarantee set-up program for all new solo 401(k) plan clients. “We are committed to helping self-employed individuals and small business owners with the opportunity to establish a self-directed Solo 401(k) plan for the 2013 taxable year,” stated Susan Glass, a 401(k) plan tax specialist with the IRA Financial Group.

IRA Financial Group Introduces Year-End Guarantee Set-Up for the Self-Directed Solo 401(k) PlanA Solo 401k plan, also known as an individual 401(k) plan offers one the ability to make annual contributions of up to $51,000 ($56,500 for those over the age of 50), borrow up to $50,000, as well as use his or her retirement funds to make almost any type of investment on their own tax-free and penalty free without requiring the consent of any custodian or person. “To take advantage of the tax deductible contribution benefits for the taxable 2013, we felt it was important to offer a service that guarantees that the solo 401(k) plan would be established in 2013, “ stated Ms. Glass.

For the 2013 taxable year, establishing a solo 401(k) retirement plan offers a self-employed individual a number of exciting tax, retirement, and investment advantages, including the ability to defer up to $56,500 annually as well as make real estate investments” stated Adam Bergman, a tax attorney with the IRA Financial Group. “IRA Financial Group’s solo 401K plan is unique and so popular because it is designed explicitly for the self-employed professional and small business owners with no full-time employees who want a flexible retirement plan with no burdensome annual administrative requirements, “ stated Ms. Glass.

There are many features of the IRA Financial Group’s Solo 401K plan that make it so appealing for small business owners.

-High Contributions: IRA Financial Group’s Self-Employed 401K plan will allow a plan participant to make annual contributions in 2013 up to $51,000 annually with an additional $5,500 catch-up contribution for those over age 50. The high contribution feature is one of the reasons a self-employed 401K plan is the most popular retirement vehicle for the self-employed.

Tax and Penalty free loan: IRA Financial Group’s Self-Employed 401k plan allows plan participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose, including paying credit card bills, mortgage payments, or anything else. The loan has to be paid back over a five-year period at least quarterly at a minimum prime interest rate (you have the option of selecting a higher interest rate).

-Checkbook Control: With IRA Financial Group’s Solo 401k plan, a plan participant will be granted checkbook control over his or her retirement funds. With IRA Financial Group’s self directed Self-Employed 401K plan, the plan account can be opened at any local bank, including Chase, Wells Fargo, and even Fidelity. In addition, the plan participant can make almost any traditional as well as non-traditional investments, such as real estate, precious metals, tax liens, and much more.

-Roth Contributions & Conversion: IRA Financial Group’s Solo 401(k) plan contains a built in Roth sub-account which can be contributed to without any income restrictions. In addition, the individual 401(k) plan allows for the conversion of a traditional 401(k) or 403(b) account to a Roth sub-account.

-Easy Administration: IRA Financial Group’s individual 401(k) plan is easy to operate. There is generally no annual filing requirement unless the self-employed 401(k) Plan assets exceeds $250,000, in which case a short information return with the IRS (Form 5500-EZ) must be completed.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading provider of IRS approved self-directed individual 401(k) plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

Dec 13

Helpful Tips For Making Investments with a Solo 401(k) Plan

Solo 401(k) Plan Investments

A Solo 401(k) Plan offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS and Department of Labor only describe the types of investments that are prohibited, which are very few.

Tips for your Solo 401(k) PlanThe foundation of the prohibited transaction rules are based on the premise that investments involving a Solo 401(k) Plan and related parties are handled in a way that benefits the retirement account and not the plan participant. The rules prohibit transactions between the plan participant and certain individuals known as “disqualified persons”. The outline for these rules can be found in Internal Revenue Code Section 4975. In general, the definition of a “disqualified person” (Internal Revenue Code Section 4975(e)(2)) extends into a variety of related party scenarios, but generally includes the Solo 401(k) Plan participant, any ancestors or lineal descendants of the plan participant, and entities in which the plan participant holds a controlling equity or management interest.

The following are some examples of types of investments that can be made with your Solo 401(k) Plan

  • Residential or commercial real estate
  • Domestic of foreign real estate
  • Raw land
  • Foreclosure property
  • Mortgages
  • Mortgage pools
  • Deeds
  • Private loans
  • Tax liens
  • Private businesses
  • Limited Liability Companies
  • Limited Liability Partnerships
  • Private placements
  • Precious metals and certain coins
  • Stocks, bonds, mutual funds
  • Foreign currencies

Real Estate

The IRS permits using a Solo 401(k) to purchase real estate or raw land. Since you are the trustee of the 401(k) Plan, making a real estate investment is as simple as writing a check from your 401(k) Plan bank account. The advantage of purchasing real estate with your Solo 401(k) Plan is that all gains are tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the plan participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

For example, if you purchased a piece of property with your Solo 401(k) Plan for $100,000 and you later sold the property for $300,000, the $200,000 of gain appreciation would generally be tax-deferred. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income tax and in most cases state income tax.

Helpful Tips :

  • The deposit and purchase price for the real estate property should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used
  • All expenses, repairs, taxes incurred in connection with the Solo 401(k) Plan real estate investment should be paid using retirement funds – no personal funds should be used
  • If additional funds are required for improvements or other matters involving the real estate investments, all funds should come from the Solo 401(k) Plan or from a non “disqualified person”
  • If financing is needed for a real estate transaction, only nonrecourse financing should be used. A nonrecourse loan is a loan that is not personally guaranteed and whereby the lender’s only recourse is against the property and not against the borrower.
  • With a Solo 401(k) Plan the use of a nonrecourse loan would not be subject to any tax pursuant to Internal Revenue Code Section 514, which is not the case with an IRA. This provides a very exciting investment opportunity.
  • No services should be performed by the Solo 401(k) Plan participant or “disqualified person” in connection with the real estate investment. In general, other then typical trustee type of services (necessary and required tasks in connection with the maintenance of the plan), no active services should be performed by the plan participant or a “disqualified person” with respect to the real estate transaction.
  • Title of the real estate purchased should be in the name of the trustee for the benefit of the plan. For example, if Joe Smith is the trustee of ABC 401K Trust, title to real estate purchased by Joe’s plan would be as follows: Joe Smith as Trustee of the ABC 401K Trust
  • Keep good records of income and expenses generated by the real estate investment
  • All income, gains or losses from a Solo 401(k) Plan real estate investment should be allocated to the Solo 401(K) Plan
  • Make sure you perform adequate diligence on the property you will be purchasing especially if it is in a state you do not live in
  • Make sure you will not be engaging in any self-dealing real estate transaction which would involve buying or selling real estate that will personally benefit you or a “disqualified person”

Tax Liens

The IRS permits the purchase of tax liens and tax deeds with a Solo 401(k) Plan. By using a Solo 401(k) Plan to purchase tax-liens or tax deeds, your profits are tax-deferred back into your retirement account until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

More importantly, with a Solo 401(k) Plan, you, as trustee of the 401(k) Plan, will have “checkbook control” over your retirement funds allowing you to make purchases on the spot without custodian consent. In other words, purchasing a tax-lien or tax deed is as easy as writing a check!

Helpful Tips :

  • The deposit and purchase price for the tax lien should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used
  • A check from the Solo 401(k) Plan account should be taking to auction or used for the tax lien purchase – no personal check or cash should be used
  • No credit card should be applied for in the name of the Solo 401(k) Plan as that would violate the IRS prohibited transaction rules. A pure debit card is allowable
  • All income, gains or losses from tax lien investments should be allocated to the Solo 401(K) Plan

Loans & Notes

The IRS permits using 401(k) funds to make loans or purchase notes from third parties. By using a Solo 401(k) Plan to make loans or purchase notes from third-parties, all interest payments received would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

For example, if you used a Solo 401(k) to loan money to a friend, all interest received would flow back into your 401(k) Plan tax-free. Whereas, if you lent your friend money from personal funds (non-retirement funds), the interest received would be subject to federal and in most cases state income tax.

Helpful Tips :

  • The loan or note amount should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used in the loan transaction
  • The loan or note should not involve a “disqualified person” directly or indirectly
  • The loan or note should have a stated interest rate of at least Prime as per the Wall Street Journal (3.25% as of August 1, 2013)
  • All interest and principal associated with the loan or note should be allocated to the Solo 401(K) Plan
  • It is good practice to have the loan terms documented in a promissory note or loan agreement
  • If you will be acting as the lender, consider securing the loan with an interest or lien in an asset owned by the borrower
  • Make sure you will not be engaging in any self-dealing loan transaction which would involve a loan or note that will personally benefit you or a “disqualified person”

Private Businesses

With a Solo 401(k) you are permitted to purchase an interest in a privately held business. The business to be purchased can be any entity other than an S Corporation (i.e. limited liability company, C Corporation, partnership, etc.). When investing in a private business using 401(k) funds, it is important to keep in mind the “Disqualified Person” and “Prohibited Transaction” rules under IRC 4975 and the Unrelated Business Taxable Income rules under IRC 512.

Helpful Tips :

  • The deposit and purchase price for the business should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used to purchase the business
  • The purchase of the stock or assets of the business should not directly or indirectly benefit the plan participant personally or any “disqualified person”
  • The purchase of a business operated via an LLC or partnership will potentially trigger the Unrelated Business Taxable Income rules under IRC 512 and a corresponding tax of approximately 35% would be applied
  • Stock of an S Corporation should not be purchased with retirement funds as the S corporation rules only allow individuals to be S Corporation shareholders
  • The purchase of stock of a C Corporation would not trigger the application of the Unrelated Business Taxable Income rules under IRC 512
  • All income, gains or losses from the purchased business should be allocated to the Solo 401(K) Plan
  • The plan participant or any “disqualified person” should not have any ownership in the business being purchased and should not directly or indirectly personally benefit from the acquisition
  • Make sure to perform adequate diligence on the business you will be purchasing or investing in especially if you will be buying the stock/interests and not the assets
  • Make sure you will not be engaging in any business acquisition transaction which would involve buying or selling a business that will personally benefit you or a “disqualified person”

Precious Metals & Coins

Our Solo 401(k) Plan documents allow for investments into precious metals and certain coins. The advantage of using a Solo 401(k) Plan to purchase precious metals and/or coins is that their values generally keep up with, or exceed, inflation rates better than other investments. In addition, the IRS approved metals can be held in the name of the 401(k) Plan at a financial organization (any local bank) safe deposit box eliminating depository fees and the coins can be held in the personal possession of the plan participant or trustee.

Helpful Tips :

  • Only IRS approved metals and coins may be purchases as per Internal Revenue Code 408(m)
  • The IRS approved precious metals or coins being purchased by the plan should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • With respect to IRS approved precious metals, the metals should not be held in the personal possession of any individual
  • With respect to the IRS approved precious metals, the metals must be held in the “physical possession” of a U.S. depository or at a U.S. bank
  • With respect to the IRS approved coins, the “physical possession” requirement that applies to precious metals does not appear to apply to coins
  • An affidavit signed by the trustee of the plan confirming that the IRS approved precious metals or coins are being purchased with being held in the sole interest of the plan is good practice
  • All income, gains or losses from the purchased precious metals or coins should be allocated to the Solo 401(K) Plan
  • IRS approved precious metals should not be held at a bank outside the United States
  • Perform adequate diligence on the dealer with which you will be transacting with for the purchase of metals or coins

Foreign Currencies

The IRS does not prevent the use of 401(k) funds to purchase foreign currencies, including Iraqi Dinars. In fact, our Solo 401(k) Plan documents permit the purchase of foreign currencies. Many believe that foreign currency investments offer liquidity advantages to the stock market as well as significant investment opportunities.

By using a Solo 401(k) to purchase foreign currencies, such as the Iraqi Dinar, all foreign currency gains generated would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

Helpful Tips :

  • Make sure you have a solid background in trading currencies – high volatile and significant risk
  • If you will be investing with a third-party, perform adequate diligence on the individual and make sure the individual has the knowledge to trade foreign currencies and all his/her securities licenses are in good standing.
  • Beware of leverage – it is allowable but it would trigger the application of the Unrelated Business Taxable Income rules under IRC 512 and thereby a corresponding tax
  • No personal guarantee of any leverage or loan obligation is permitted
  • All income, gains or losses from the foreign currency transactions should be allocated to the Solo 401(K) Plan

Stocks, Bonds, Mutual Funds, CDs

In addition to non-traditional investments such as real estate, a Solo 401(k) may purchase stock, bonds, mutual funds, and CDs. The advantage of using a self-directed Solo 401(k) Plan is that you are not limited to just making these types of investments. With a Solo 401(k) Plan with “checkbook control” you can open a stock trading account with any financial institution as well as purchase real estate, buy tax liens, or lend money to a third-party. Your investment opportunities are endless! When purchasing stocks or securities with a Solo 401(k) Plan, all income and gains, including dividends, would flow back to the plan without tax. With a Roth Solo 401(k) Plan, all gains are tax-free. Whereas, if you purchased stocks with personal funds, all income and gains would be subject to federal and in most cases state income tax.

Helpful Tips :

  • If you will be investing with a third-party, perform adequate diligence on the individual and make sure the individual has the knowledge to trade stocks or securities and all his/her securities licenses are in good standing.
  • Beware of promoters who are promising high returns and that do not work at reputable financial institutions – high likelihood of fraud
  • Beware of leverage – it is allowable but it would trigger the application of the Unrelated Business Taxable Income rules under IRC 512 and thereby a corresponding tax
  • No personal guarantee of any leverage or loan obligation is permitted
  • Open up a brokerage account in the name of the Solo 401(k) Plan – not a personal account
  • All income, gains or losses from the stock investments should be allocated to the Solo 401(K) Plan

If you have any questions about whether your specific Solo 401(k) Plan transaction would potentially be in violation of IRS rules, please contact a tax professional at the IRA Financial Group at 800-472-0646.

Dec 12

Asset & Creditor Protection for Your Solo 401k

RETIREMENT accounts have become many Americans’ most valuable assets. That means it is vital that you have the ability to protect them from creditors, such as people who have won lawsuits against you.

In general, the asset/creditor protection strategies available to you depend on the type of retirement account you have (i.e. Traditional IRA, Roth IRA, or 401(k) qualified plan, etc.), your state residency, and whether the assets are yours or have been inherited.

Federal Protection for 401(k) Plan Qualified Plan for Bankruptcy

Effective for bankruptcies filed after October 17, 2005, the following rules give protection to a debtor’s retirement funds in bankruptcy by way of exempting them from the bankruptcy estate. The general exemption found in sec­tion 522 of the Bankruptcy Code, 11 U.S.C. §522, pro­vides an unlimited exemption for retirement assets ex­empt from taxation for Section 401(a) (tax qualified retirement plans—pen­sions, profit-sharing and section 401(k) plans). Thus, ERISA qualified plans as well as Solo 401(k) plans are afforded full bankruptcy exemption. What this means is that if a participant of a 401(k) Plan declares bankruptcy, his or her 401(k) plan assets will be exempt from the bankruptcy proceeding and could not be attached by the bankruptcy’s estates creditors.

Federal Protection for 401(k) Plan Qualified Plan Funds Outside of Bankruptcy

RETIREMENT accounts have become many Americans' most valuable assets. That means it is vital that you have the ability to protect them from creditors, such as people who have won lawsuits against you. In the case of a debtor who is not under the ju­risdiction of the federal bankruptcy court but rath­er has become involved in a state law insolvency, enforcement, or garnishment proceeding, the 2005 Bankruptcy Act is inapplicable and the ERISA rules and state laws would govern.

Title I of ERISA requires that a pension plan provide that benefits under the plan may not be assigned or alienated; i.e., the plan must provide a contractual “anti‑alienation” clause. For the anti-alienation clause to be effec­tive, the underlying plan must constitute a “pension plan” under ERISA. Such a plan is any “plan, fund or program which…provides retirement income to employees.” ERISA §3(2)(A).. Therefore, a plan that does not benefit any common-law employee is not an ERISA pension plan. As a result, a Solo 401(k) Plan is not treated as an ERISA Plan.

In addition to the ERISA protection, the Internal Revenue Code Section 401(a)(13(A) provides that “[a] trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated. Thus, a retirement plan will not attain qualified status unless it precludes both volun­tary and involuntary assignments.

Note – neither ERISA nor Code protections apply to assets held under individual retirement arrange­ments, simplified employee pension plans, govern­ment plans, or most church plans.

Furthermore, ERISA sec­tion 514(a) provides that ERISA supersedes state laws insofar as such laws relate to employee benefit plans. The ERISA anti-alienation and preemption provisions combine to make state attachment and garnishment laws inapplicable to an individual’s benefits under an ERISA-covered employee ben­efit plan.

Exceptions

There are a number of exceptions to ERISA’s and the Code’s anti‑alienation provisions:

1. Qualified domestic relations orders (“QDROs”), as defined in Internal Revenue Code Section 414(p), may be exempted (Internal Revenue Code §401(a)(13)(B); ERISA §206(d)(3)). This means that retirement plan assets are a marital asset sub­ject to division in divorce and attachment for child support.

2. Up to 10 percent of any benefit in pay status may be voluntarily and revocably assigned or alienated (Internal Revenue Code §401(a)(13)(A); Treas. Reg. §1.401(a)-13(d)(1); ERISA §206(d)(2)).

3. A participant may direct the plan to pay a ben­efit to a third party if the direction is revocable and the third party files acknowledgment of lack of en­forceability (Treas. Reg. §1.401(a)-13(e)).

4. Federal tax levies and judgments are exempt­ed. The Treasury Regulations under Code section 401(a)(13) provide that plan benefits are subject to attachment by the IRS in common law and com­munity property states.

In addition to the statutory exceptions noted above, several court decisions have held that an individual’s retirement plan benefits may be sub­ject to attachment for federal criminal penalties or restitution arising from a crime

Solo 401(k) Plans

A debtor’s plan benefits under a pension, prof­it-sharing, or section 401(k) plan are generally safe from creditor claims both inside and outside of bankruptcy due to ERISA and the Code’s broad anti-alienation protections. However, case law and Department of Labor Regulations have held that such a plan that benefits only an owner (and/or an owner’s spouse) are not ERISA plans, thus voiding the anti-alienation protections generally afforded to ERISA plans. Thus, state law will govern the protection afforded to Solo 401(k) Plans outside the bankruptcy context.

State Law Protection of Solo 401(k) Plan Assets Outside of Bankruptcy

Because case law and Department of Labor Regulations have held that such a plan that benefits only an owner (and/or an owner’s spouse) are not ERISA plans, thus voiding the anti-alienation protections generally afforded to ERISA plans, state law will govern the protection afforded to Solo 401(k) Plans outside the bankruptcy context.  Click here for a table that will provide a summary of state protection afforded to Solo 401(k) Plans from creditors outside of the bankruptcy context.

Asset Protection Planning

The different federal and state creditor protection afforded to 401(k) qualified plans and IRS inside or outside the bankruptcy context presents a number of important asset protection planning opportunities.

If, for example, you have left an employer where you had a qualified plan, rolling over assets from a qualified plan, like a 401(k), into an IRA may have asset protection implications. For example, if you live in or are moving to a state where IRAs are not protected from creditors or have in excess of $1million dollars in plan assets and are contemplating bankruptcy, you would likely be better off leaving the assets in the company qualified plan.

Note – If you plan to leave at least some of your IRA to your family, other than your spouse, the assets may not be protected from your beneficiaries’ creditors, depending on where the beneficiaries live. IRA assets left to a spouse would likely receive creditor protection if the IRA is re-titled in the name of the spouse. However, you will likely be able to protect your IRA assets that you plan on leaving to your family, other than your spouse, by leaving an I.R.A. to a trust. To do that, you must name the trust on the IRA custodian Designation of Beneficiary Form on file.

The Solo 401(k) Asset & Creditor Protection Solution

By having and maintaining a Solo 401(k) Plan, the people to whom you owe money – as a result of normal debt, bankruptcy or a civil court judgment – will likely not be able to reach your Solo 401(k) assets to satisfy the debt. However, Solo 401(k) Plan assets are not federally protected from divorce settlements or federal tax liens. As illustrated above, most states will afford Solo 401(k) Plans full protection from creditors outside of the bankruptcy context.

Please contact one of the tax experts from the IRA Financial Group at 800-472-0646 for more information.