Nov 30

Are All Individual 401(k) Plans the Same?

When it comes to determining what type of 401(k) qualified retirement plan is best for a self-employed individual or small business owner with no employees, it is important to look at all the options the plan provides to make sure it will satisfy your retirement planning, tax, and investment goals.  Most financial institutions offer Solo 401(k) Plans, often called Individual 401(k) Plans. However, if you do not want to be forced to invest all your hard earn retirement savings in the stock market, then these type of financial institution Solo 401(k) Plans are not very attractive. In addition, most financial institution Solo 401(k) Plans will not offer a loan feature or allow you to make Roth Type contributions.

IRA Financial Group’s Individual 401(k) plan is unique and so popular because it is designed explicitly for small, owner-only business.  There are many features of the IRA Financial Group’s Solo 401K plan that make it so appealing for small business owners.

High Contributions: Like all Solo 401K Plans, for 2017, IRA Financial Group’s Solo 401(k) Plan will allow a plan participant to make annual contributions up to $54,000 annually with an additional $6,000 catch-up contribution for those over age 50. The high contribution feature is one of the reasons a Solo 401K Plan is the most popular retirement vehicle for the self-employed.

Calculate Your Solo 401k Plan Maximum Contribution Limit Please click here to calculate your Solo 401(k) Plan Maximum Contribution Limit.

Tax and Penalty free loan: Unlike most Solo 401K Plans offered by the traditional financial institutions such as Fidelity, IRA Financial Group’s Solo 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).

Are All Individual 401(k) Plans the Same? Checkbook Control: The most attractive feature of the IRA Financial Group Solo 401k Plan is that it offers the plan participant checkbook control over his or her retirement funds. In the case of a conventional Solo 401K Plan offered by most financial institutions, the plan participant is relegated to making traditional investments such as stocks and or mutual funds. In addition, the Solo 401KPlan account is required to be opened at the financial institution. With IRA Financial Group’s Solo 401K Plan, the plan account can be opened at any local bank, including Chase, Wells Fargo, and even Fidelity. In addition, with IRA Financial Group’s Solo 401K Plan, 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. With IRA Financial Group’s Solo 401K Plan, the Plan participant has the freedom to make the investments he or she wants while at the same time opening the 401K account at any local bank. As trustee of the Solo 401K Plan, the Plan Participant (you) can serve as the trustee providing you checkbook control over your retirement funds. With IRA Financial Group’s Solo 401K Plan, making a Solo 401K Plan investment is as simple as writing a check.

Roth Contributions & Conversion: Unlike a conventional Solo 401K Plan offered by most financial institutions, IRA Financial Group’s Solo 401K Plan contains a built in Roth sub-account which can be contributed to without any income restrictions. In addition, the IRA Financial Group’s Solo 401K Plan allows for the conversion of a traditional 401(k) or 403(b) account to a Roth subaccount. However, the Solo 401K Plan participant must pay income tax on the amount converted.

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.

Easy Administration: Like all Solo 401K Plans, IRA Financial Group’s Solo 401K Plan is easy to operate. There is generally no annual filing requirement unless your solo 401K Plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ). However, unlike a financial institution, the tax professionals at the IRA Financial Group will assist you in completing this form is required.

To learn more about the advantages of the Solo 401K Plan with Checkbook Control please contact a 401K Expert at 800-472-0646.

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Aug 28

Individual 401(k) Loan Rules

Under an Individual 401(k) Plan, also known as a Solo 401(k) plan, a plan participant may be eligible to obtain a loan from the vested balance of the Individual 401(k) plan balance without triggering a distribution subject to tax or penalty. With IRA Financial Group’s Individual 401(k) plan, the IRA or 401(k) plan funds rolled into the new Individual 401(k) plan, as well as any employee deferrals would be vested immediately. In general, diverting plan assets for personal use before a valid distribution usually triggers a prohibited transaction, however, the plan loan feature represents the only limited exception to the prohibited transaction rules (Internal Revenue Code Section 4975(d)(1) and ERISA Section 408).

Individual 401(k) Plan Loan Requirements

In order to be eligible to take a loan from a Individual 401(k) plan, the Individual 401(k) plan documents must specifically provide for a loan program. The requirements for plan loans are quite technical and out are outlined in Department of Labor (DOL) Regulation 2550.408b-1. IRA Financial Group offers a Individual 401(k) qualified retirement plan loan kit that confirms to the DOL loan regulations and include documents necessary to administer a Individual 401(k) loan program.

To be exempt from the prohibited transaction rules, a Individual 401(k) loan must:

  • be available to all participants of the Individual 401(k) plan on a reasonably equivalent basis;
  • be made in accordance with specific provisions of the loan program contained in the Individual 401(k) plan
  • bear a reasonable interest rate, which based on the loan kit, is considered to be at least the “Prime” rate of interest, which as per the Wall Street Journal is 4.25% as of 6/23/17, and
  • be adequately secured (DOL Reg. 2550.408b-1(a)(1)

The DOL loan regulations require that the 401(k) plan contain specific provisions regarding loans and the following information must generally be made available to participants in written form:

  • The identify of the person or positions authorized to administer the 401(k) loan program;
  • the procedures to be used in applying for loans;
  • the basis upon which loans will be approved or denied;
  • the procedures used to determine a reasonable interest rate for plan loans;
  • the events that will constitute

IRS Plan Loan Requirements

To avoid having a plan loan treated as a taxable distribution to the recipient, the following conditions must be satisfied (IRC Sec. 72(p)(2)).

  • The loan must have level amortization, with payments made at least quarterly.
  • The recipient generally must repay the loan within five years.
  • The loan must not exceed statutory limits.

Repayment Terms

Under IRC Sec. 72(p)(2)(C), the loan amortization schedule must provide for substantially equal payments to be made at least quarterly. Treas. Reg. 1.72(p)-1, Q&A 10, provides for a cure period that allows a loan participant to avoid an immediate deemed distribution following a missed payment. The cure period may not extend beyond the last day of the calendar quarter in which the required payment was due.

Recipients generally must repay loans in full within five years from the date of loan origination (IRC Sec. 72(p)(2)(B)). An exception to the five-year payback rule exists for loans used to purchase a principal residence of the participant. If a participant wants a repayment period longer than five years, employers should obtain a sworn statement from the participant certifying that the loan is to be used to purchase the participant’s principal place of residence (for plan loan purposes, “principal residence” has the same meaning as the term under IRC Sec. 121).

Maximum Loan Amount

Individual 401(k) Loan RulesGenerally, the maximum amount that an employee may borrow at any time is one-half the present value of his vested account balance, not to exceed $50,000. The maximum amount, however, is calculated differently if an individual has more than one outstanding loan from the plan. If the principal loan amount exceeds this standard, the loan amount that exceeds the limit will be deemed a distribution and thus taxable to the participant. In addition, if a loan is treated as a taxable distribution, it is subject to a 10 percent early distribution penalty tax if the employee is under age 59 ½ (IRC Sec. 72(t)). If a plan loan fails to satisfy the loan regulations and is considered a deemed distribution, the employer must use code L to report the distribution on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

EXAMPLE: Bob wants to take a loan from his Individual 401(k) plan, which allows for loans of 50% of a participant’s vested account balance up to $50,000. Because Bob has a vested balance of $40,000, the maximum amount that he can borrow from the account is $20,000.

50% x $40,000 = $20,000

If Bob has a vested balance greater than $100,000, he could only borrow $50,000.

NOTE: Plan permitting, a loan, not to exceed $10,000, that exceeds 50 percent of a participant’s vested balance can be made if the amount exceed the 50 percent is secured with additional collateral (IRC Sec. 72(p)(2)(A)(ii)). (Most plans do not provide this option because of the complexity associated with obtaining the additional collateral.)

Loan Limits For More Than One Outstanding Loan

A Individual 401(k) plan permitting participants to use the loan feature may have more than one outstanding loan from the plan at a time. IRC Sec. 72(p)(2) provides a specific method to determine the maximum loan amount for participants who have outstanding loans. As described earlier, any new loan, when added to the participant’s outstanding loan balance from the plan, cannot exceed a) the lesser of 50 percent of the participant’s vested account balance, or b) the $50,000 maximum limit reduced by the difference between:

  • The participant’s highest outstanding loan balance from the plan at any time during the one year period ending on the day before the new loan is made, and
  • The participant’s outstanding loan balance on the date the new loan is made.

EXAMPLE: The loan program under ABC Inc’s Individual 401(k) Plan provides for maximum loans based on the statutory maximum loan amount provided in IRC Sec. 72(p)(2). On January 1, 2014, Jane had a vested account balance in her Individual 401(k) Plan of $125,000 and took a plan loan of $40,000 to be paid in 20 quarterly installments of $2,491. On January 1, 2017, when her outstanding loan balance is $33,322 and her account balance is $140,000, Jane requests another plan loan.

The difference between the highest outstanding loan balance for the preceding one-year period ($40,000) and the outstanding loan balance on the day the new loan is to be made ($33,322) is $6,678. Jane’s new loan plus her current outstanding loan balance (her maximum outstanding loan limit) cannot exceed a) the lesser of 50% of her vested account balance, or b) $50,000 reduced by this difference. The maximum amount Jane can take for her second loan, therefore, is $10,000.

Step 1: Highest outstanding balance – current outstanding balance = the difference

Step 2: The lesser of a) or b) = maximum outstanding loan amount

  • $140,000 x 50% = $70,000
  • $50,000 – $6,678 = $43,322

Step 3: Maximum outstanding loan amount – current outstanding balance = maximum second loan amount

$43,322 – $33,322 = $10,000

Proper Loan Documentation

Plan loan documents should contain sufficient information to clearly demonstrate that the loan program is intended to satisfy DOL and IRS regulations.

Loan Agreement

The loan program for a plan must be evidenced by a legally enforceable agreement (Treas. Reg. 1.72(p)-1, Q&A 3(b)). The loan documents should explain how the loan program operates, including plan loan requirements and the application process. According to regulations, the loan agreement must clearly identify an amount borrowed, a loan term, and a repayment schedule.

Loan Disclosure

For plans subject to Title I of ERISA, a loan disclosure is required as part of the loan program documentation and becomes part of the plan’s summary plan description (SPD). The loan disclosure describes in plain language the loan program terms and provides the name, address, and phone number of the loan program administrator.

Truth-in-Lending Requirements

Some plans may be subject to the Federal Reserve Board Regulation Z (Truth-in-Lending) rules. If more than 25 loans been taken from a plan in the preceding year or in the current year, or if more than five loans that are secured by dwellings have been taken in the preceding year or current year, the truth-in-lending rules apply and an additional truth-in-lending disclosure is required. The Board of Governors of the Federal Reserve has amended Regulation Z to exempt retirement plan loans from the truth-in-lending requirements, effective July 1, 2010, if the plan loan complies with the IRS requirements and is issued from vested portions of a participant’s account.

Spousal Waivers

Under the Retirement Equity Act of 1984 (REA), many plans require that a participant receive the consent of her spouse before taking distributions in a form other than a qualified join and survivor annuity (QJSA). Under these plans, a participant must obtain spousal consent before using any portion of her vested account balance as security for a plan loan (Treas. Reg. 1.401(a)-20, Q&A 24). If a previous plan loan is renegotiated, extended, renewed, or otherwise revised, it will be treated as a new loan, thereby requiring spousal consent.

Other Suggested Forms

To facilitate smooth operation of the loan program, the following forms are useful.

  • Loan application form
  • Payment authorization form
  • Loan notice of credit denial

The tax professionals at the IRA Financial Group will assist you in completing all required Individual 401(k) plan loan documents.

Defaults and Deemed Distributions

If a loan fails to satisfy the statutory requirements regarding the loan amount, the loan term, and the repayment schedule, the loan is in default and is considered a deemed distribution. In the case of a loan that exceeds the maximum allowable amount, only the excess amount is treated as a deemed distribution (Treas. Reg. 1.72(p)-1, Q&A 4). If a participant fails to make a quarterly installment payment on the loan, the loan is in default and the remaining loan balance is a deemed distribution. Under the loan regulations, the employer may grant a grace period for making a loan payment (by the end of the quarter following the quarter of the missed payment), thus preventing a loan default.

Relief from loan payments also may be granted to participants who are on leave of absence without pay or receiving a rate of pay that is less than the installment payments. In this case, payments may be suspended for a period not longer than one year. To remain in compliance with IRC Sec. 72(p), however, the loan must be repaid within the original time frame provided by the loan agreement.

A deemed distribution will not be treated as a distribution for purposes of the requirements of IRC Sec.1.411(a)-7(d)(5), relating to the determination of a participant’s account balance if a distribution is made at a time when the participant’s vesting percentage may increase.

With the IRA Financial Group, you will be working directly with specially trained tax professionals to help you take a loan from your Individual 401(k) plan as well as administer it yourself without the need to hire a special plan administrator.

To learn more about IRA Financial Group Individual 401(k) loan program and the rules surrounding the solo 401(k) loan, please contact a tax professional at 800-472-0646.

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Dec 19

Why You Need Checkbook Control of Your Individual 401k Plan

An Individual 401(k), also known as a Solo 401(k), is perfect for sole proprietors, small businesses and independent contractors.

A Solo 401(k) plan is generally also referred to as a “checkbook control” Qualified Retirement Plan. In each case, a 401(k) plan is established whereby the participant serves as trustee and administrator of the Plan providing the participant with “checkbook control” over his or her retirement funds.

With a “checkbook control” Solo 401(K) Plan you will never have to seek the consent of a custodian to make an investment or be subject to excessive custodian account fees based on account value and per transaction.

By having “checkbook control” over your retirement funds you will gain the following advantages:

“Checkbook Control”: You’ll no longer have to get each investment approved by the custodian of your account. Instead, all decisions are truly yours. To make an investment, simply write a check and use the funds straight from your Solo 401(k) Plan bank account.

When making a real estate investment or purchasing tax liens, a “checkbook control” Solo 401(k) Plan, will allow you as manager of the LLC the ability to simply write a check from your Solo 401(k) Plan bank account.

Example 1: Joe has a Solo 401(k) set-up by the IRA Financial Group. Joe has established his Solo 401(k) Plan bank account with Bank of America. Joe wishes to use his retirement funds to purchase a home from Steve, an unrelated third-party (non-disqualified person). Steve is anxious to close the transaction as soon as possible. With a “checkbook control” Solo 401(k) Plan, Joe can simply write a check using the funds from his 401(k) Plan bank account or can wire the funds directly from the account to Steve. Joe, as trustee of the plan, no longer needs to seek the consent of the custodian before making the real estate purchase. With a custodian controlled Solo 401(k) Plan without “checkbook control” Joe may not be able to make the real estate purchase since seeking custodian approval would likely take too much time.

Example 2: Joe has a Solo 401(k) set-up by the IRA Financial Group. Joe has established his Solo 401(k) Plan bank account with Bank of America. Joe wishes to use his retirement funds to invest in tax lien certificates via auction. Purchasing tax lien certificates requires Joe make the payment at the auction. With a “checkbook control” Solo 401(k) Plan, Joe can simply bring his 401(k) Plan bank account checkbook to the closing or secure a certified check from the bank in order to make payments at the auction. With a custodian controlled Solo 401(k) Plan without “checkbook control” Joe would not be able to make tax lien certificate investments because he would need custodian approval before each tax lien certificate purchase and would not have sufficient time to seek the consent of the custodian.

No Custodian Fees or Transaction Fees: The most significant cost benefit of the Solo 401(k) plan is that it does not require the participant to hire a bank or trust company to serve as trustee. In other words, there are no custodian fees or transaction fees when establishing a Solo 401(k) Plan with the IRA Financial Group. This flexibility allows the participant to serve in the trustee role. This means that all assets of the 401(k) trust are under the sole authority of the Solo 401k participant.  A Solo 401(k) plan allows you to eliminate the expense and delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

Speed: You can act quickly on a great investment opportunity. When you find an investment that you want to make with your retirement funds, simply write a check or wire the funds straight from your Solo 401(k) Plan bank account to make the investment. The Solo 401(k) Plan allows you to eliminate the delays associated with using an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

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

Solo 401k Solution

For more information about the Checkbook Control Individual 401(k) plan, please contact us @ 800.472.0646.

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Aug 29

What Types of Administration Costs are Required to Maintain an Individual 401k?

The Individual 401(k) plan is easy to operate. There is generally no annual filing requirement unless your Individual 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).

What Types of Administration Costs are Required to Maintain an Individual 401k?

Beyond this reporting requirement, basic reporting requirement ought to be maintained. This essentially means to keep all records, receipts, contracts relating to the Individual 401(k) and its investments on file.

Please contact one of our 401(k) Experts at 800-472-0646 for more information.

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Jul 19

What are the Eligibility Requirements for an Individual 401(k) Plan?

An Individual 401(k) Plan plan is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. An Individual 401(k) Plan is perfect for any sole proprietor, consultant, or independent contractor.

To be eligible to benefit from the Individual 401(k) Plan, investor must meet just two eligibility requirements:

1. The presence of self employment activity.

2. The absence of full-time employees.

The Presence of Self Employment Activity

Self employment activity generally includes ownership and operation of a sole proprietorship, Limited Liability Company (LLC), C Corporation, S Corporation, and Limited Partnership where the business intends to generate revenue for profit and make significant contributions to the plan.

Generate Revenue for Profit

There are no established thresholds for how much profit the business must be generated, how much money must be contributed to the plan, or how soon profits and contributions must happen. It is generally believed that the IRS will consider you eligible if the business being conducted is a legitimate business that is run with the intention of generating profits. The self employment activity can be part time, and it can be ancillary to full time employment elsewhere. A person can even participate in an employer’s 401(k) plan in tandem with their own Individual 401(k). In such a case, the employee elective deferrals from both plans are subject to the single contribution limit.

The Absence of Full-Time Employees

Unlike a regular 401(k) plan, an Individual 401(k) Plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees and are not employed by any business owned by them or their spouse (an exception applies if your full-time employee is your spouse). The business owner and their spouse are technically considered “owner-employees” rather than “employees”.

The following types of employees may be generally excluded from coverage:

  • Employees under 21 years of age
  • Employees that work less than a 1000 hours annually
  • Union employees
  • Nonresident alien employees

If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up. However, an Individual 401(k) eligible business can have part time employees and independent contractors.

Please contact one of our 401(k) Experts at 800-472-0646 for more information.

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Jul 09

The Individual 401(k) Plan

A Solo 401(k) Plan also called an Individual 401(k) Plan offers a self-employed business owner the ability to use their retirement funds to make almost any type of investment tax-free, including real estate on their own without requiring custodian consent. As long as a business exists with no full-time employees other than the owner and his/her spouse, an Individual 401(k) Plan can be established.

An Individual 401(k) Plan is perfect for any sole proprietor, consultant, or independent contractor, such as a realtor, doctor, accountant, attorney, dentist, or sales agent. The Individual 401(k) Plan can be adopted by a sole proprietorship, LLC, Partnership, or Corporation.

There are many reasons why the Individual 401(k) Plan is considered the most attractive retirement solution for the self-employed.

High Contributions: Under the 2015 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $18,000. 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 $53,000, an increase of $1,000 from 2014.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $24,000. 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 $59,000, an increase of $1,500 from 2014.

Calculate Your Solo 401k Plan Maximum Contribution Limit Please click here to calculate your Solo 401(k) Plan Maximum Contribution Limit.

Tax-Free Loan for any Purpose: With an Individual 401(k) Plan, a plan participant is eligible to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose, including paying personal expenses such as credit card bills, mortgage payments, personal or business investments, a car, vacation, 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). There is no pre-payment penalty.

True “Checkbook Control”: One of the most popular aspects of the Individual 401(k) Plan is that it does not require the participant to hire a bank or trust company to serve as trustee of the Plan. Unlike an IRA, which requires a financial institution to serve as trustee and custodian of the IRA, in the case of a Individual 401(k) Plan, the plan account can be opened at any local bank or credit union and the plan participant can serve as trustee of the Plan. This flexibility allows the plan participant (you) to gain “checkbook control” over your retirement funds. In essence, all assets of the Individual 401(k) Plan will be under the sole authority of the 401(k) participant.  An Individual 401(k) plan allows you to eliminate the expense and delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself. With an Individual 401(k) Plan, making a 401(k) Plan investment is as simple as writing a check.

Unlocking A World of Investment Opportunity: With an Individual 401(k), you will be able to invest in almost any type of investment opportunity that you discover, including: Real Estate (rentals, foreclosures, raw land, tax liens etc.), Private Businesses, Precious Metals, Hard Money & Peer to Peer Lending as well as stock and mutual funds; your only limit is your imagination. The income and gains from these investments will flow back into your Individual 401(k) Plan tax-free!

The Individual 401(k) PlanUse Nonrecourse Leverage Tax-Free: When an IRA buys real estate that is leveraged with nonrecourse mortgage financing, it creates Unrelated Debt Financed Income (a type of Unrelated Business Taxable Income) on which taxes must be paid pursuant to Internal Revenue Code Section 514. An Individual 401(k) plan is generally exempt from UDFI. In other words, unlike an IRA, Internal Revenue Code Section 514(c)(9), allows an Individual 401K plan to use nonrecourse leverage to make a real estate acquisition without tax or penalty.

After-Tax (Roth) Contributions: The Individual 401(k) Plan contains a built in Roth sub-account which can be contributed to without any income restrictions. An Individual 401K Plan will allow you to make pre-tax and/or after-tax (Roth) employee deferral contributions to your Plan.

Simple Plan Administration: The Individual 401(k) Plan is easy to operate and effortless to administer. There is generally no annual filing requirement unless the assets in your Individual 401(k) Plan exceeds $250,000, in which case you will need to file a short information return with the IRS (Form 5500-EZ).

Roth 401K Conversion: The Individual 401(k) Plans allows for the conversion of pre-tax 401(k) funds to an after-tax Roth sub-account contained in the Individual 401(k) Plan. However, the Individual 401(k) Plan participant must pay income tax on the amount converted.

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.

Asset & Creditor Protection: In the case of a bankruptcy, 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 Self-Directed 401(k) plans, are afforded full bankruptcy exemption. Outside of bankruptcy, state law will govern whether Individual Solo 401(k) Plan assets are protected from creditors. Most states will provide protection for Individual Solo 401(k) Plan assets from creditors outside of the bankruptcy context.

IRA Financial Group will take care of setting up your entire Individual 401K Plan. The whole process can be handled by phone, email, fax, or mail and typically takes between 2-10 days to complete, the timing largely depending on the time it takes your current retirement asset custodian to move the funds to the new Individual 401K Plan account. Our tax and ERISA professionals are on-site greatly reducing the setup time and cost. Most importantly, each client of the IRA Financial Group is assigned a retirement tax professional to help with the establishment of the Self-Directed 401K Plan.

For additional information on the Individual 401(k) Plan, please contact us at 800-472-0646.

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