JJA

jpod Because the solo 401(k) plans offered by US banks and brokerages suffer from severe limitations on investment options - none allows RE investments for example. And I have not seen any of the firms offering to set up such plans with wider options, to be offering trustee services - custodian is another matter, the bank or brokerage where the trust account is opened serves as custodian anyways. All these firms offering help to setup "self directed" solo 401(k) ask for a substantial fee just for the plan/trust contract, which is a one-way contract, and supposed guidance in setting up the plan yourself. As far as outside trustee companies, I was told they charge a yearly fee which for a plan with not much money like mine may be too expensive. In the end, the question I raise is one of principle. The way I see it there is a lot of misinformation out there, even in this forum where supposed pundits erroneously refer to the ERISA restrictions on foreign "indicia of ownership" all the time while talking about solo plans for which ERISA simply does not apply. And I have not read enough of the forum posts to know to what extend the apparent error regarding the definition of domestic trusts is spread in here, that is in addition to all the warnings against what may well turn out to be a legal practice I have found on the internet and some of which I have brought up in my posts above. I suppose most people writing in here are accountants or of related professions. I hope someone with a legal background would look into this matter, because I cannot see why people must be scared away from considering their full options when it comes to retirement plan choices. Isn't the latter, that is helping people make informed choices, the purpose of forums like this one ?

After further research I am inclined to disagree with the blogger and compliance officer of the particular plan organizer company who claims that a solo 401(k) trust loses its domestic status by the mere fact that its US citizen trustee resides abroad. (1) a US citizen is always "a US person" regardless of residence according to the IRS, because the IRS defines a US person on the single test of whether it is subject to US taxation on its worldwide income. This test applies also to all legal entities, be they companies, trusts or other organizations. See page 3 of this link for the relevant references: http://www.daypitney.com/news/docs/dp_3952.pdf (2) "Under prior law, a trust was considered foreign or domestic based upon such factors as the residence of the trustee, the principal place of trust administration, the governing law of the trust, the nationality of the trust settlor and the beneficiaries, and the situs of trust assets.9 The 1996 Small Business Act replaced this subjective "facts and circumstances" test with an objective test to determine whether a trust is foreign or domestic." http://www.capdale.com/foreign-trusts-everything-you-wanted-to-know-about-the-taxation-of-foreign-trusts-but-were-afraid-to-ask Relevant is 26 CFR 301.7701-7 - "Trusts—domestic and foreign" https://www.law.cornell.edu/cfr/text/26/301.7701-7 Therefore, the EPCU requirement for a "domestic trust" brought up in the above mentioned blog, though referring to employee and no solo plans but assumed relevant to solo plans also, as well as similar requirements in the IRC mentioned further down in the same blog (http://mysolo401k.blogspot.ru/2012/07/solo-401k-can-be-invested-foreign.html), are satisfied by a trust organized under US law, subject to US tax law and filing requirements, with a bank or brokerage account at a US branch and administered by a US citizen trustee ((these are the things that consitute "administration") regardless of the trustee's place of residence - after all with todays technology one would be hard pressed to tell whether a trustee runs the trust from Stockton or Hong Kong. Furthermore, if a US court decides to place an arrest or lien on the trust bank account it can do it as the account is with a US bank or brokerage, regardless of the residence of the trustee. The second requirement in the EPCU definition, that "one or more U.S. persons have authority to control all of the trust’s substantial decisions", is satisfied if a US citizen is the trust's trustee because, as mentioned above, according to the IRS a US citizen is a US person regardless of his/her place of residence. Please comment.

Update: not so fast... While ERISA indeed does not apply to solo 401(k) plans, apparently there is an IRS requirement for the plan trust, including the solo 401(k) plans, to be a "domestic trust". The compliance officer of the plan provider I mentioned earlier, brought to my attention the following blog, where an IRC requirement for the plan trust to be a "domestiv trust" is mentioned, while the IRS EPCU (on employee related plans and not solo 401(k) plans) adds in a comment that the trust is domestic if run by a "US person", from which the plan provider has concluded that there is a US residency requirement for the plan trustee. http://mysolo401k.blogspot.ru/2012/07/solo-401k-can-be-invested-foreign.html This, of course, is the opinion of the blogger - the IRC simply demands that the plan trust be "domestic", while it is the EPCU in a comment and not the law that mentions the definition of a domestic trust to be run by a "US person". But again, why would a trust organized under domestic US law and having a bank account at a domestic US bank branch, by a US citizen residing abroad, not be considered to be a "domestic trust" by the mere fact that the trustee resides abroad ? I find this claim ridiculous. If not domestic, then is it a North Korean trust if the US citizen trustee resides in North Korea ? Please comment all ya knowledgeable forum dwellers.

"Owner Only or Solo 401(k) Plan". ERISA does not apply I was told by the DOL EBSA today. You can buy any foreign stock or other assets and not worry about ERISA 404(b) or other ERISA restrictions, which are explicitly meant to protect employees, not solo owners.

Follow up: I just got off the phone with a nice lady from the EBSA/DOL, who explained to me that ERISA does not apply at all to individual 401(k) plans, as it concerns only plans set up for the benefit of employees. In other words, as long as the plan covers only the self employed person (and his spouse), ERISA does not apply and only the relevant IRS code - and section 401(k) refers to the IRS code and not ERISA - applies. Any opinions or confirmation by anyone who knows about this issue ?

(YOU CAN SAVE YOURSELF SOME TIME BY JUMPING TO POSTS #3 AND #4, WHERE THE GIST OF THE CASE IS DISCUSSED) Hello there and congrats on your forum. I have a question relating to section ERISA section 404(b) and the infamous "indicia of ownership" requirement. Hypothetical US citizen lives abroad and works as a self employed individual. He wants to start a solo 401(k) in the US, where he will rollover his old Keogh plan assets, and serve as its trustee. He was told by one, only, of the companies that prepare the plan documents, that this is impossible because it runs afoul of section 404(b) requirements, which state (verbatim): "(a) No fiduciary may maintain the indicia of ownership of any assets of a plan outside the jurisdiction of the district courts of the United States, unless:..." http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=9c47fc8bb98170084f4b24aa36e4c6b9&n=29y9.1.3.6.6&r=PART&ty=HTML#se29.9.2550_1404b_61 https://www.law.cornell.edu/cfr/text/29/2550.404b-1 I am having an issue with this interpretation which equates the jurisdiction of the US District Courts with their assigned territorial extend for puproses of interior - to the US - administration. Yet the US government has no trouble extending its long (jurisdiction) hand way beyond the US territories when demanding my taxes on foreign income. I am arguing that a US citizen, and the documents he/she posseses, are always under the jurisdiction of all US courts regardless of his/her place of abode, and therefore the citizen who wants to act as a trustee of his own, indvidual, 401(k) plan should be able to do so, because, in contrast to a foreigner who can arguably refuse to appear at a US court claiming lack of jurisdiction, and for which such cases I suppose the essence of section 404(b) was created, a US citizen is legally obliged to appear - and bring any evidence he asked to bring - before any US court deciding to drag him back to the US on a short notice. Therefore, I am proposing, a US citizen residing abroad and acting as a trustee of his own 401(k) plan, does not violate the ERISA section 404(b) requirements. If it can be of any help, from what I understand from DOL Advisory Opinion 2008-04A (https://www.dol.gov/ebsa/regs/aos/ao2008-04a.html) which deals with the issue of "indicia of ownership" but for large plans and foreign investment funds, the argument for the approved exception from 404(b) requirements, even though the "indicia" does not reside physically in the US, goes along similar lines with my argument of citizenship placing the trustee under jurisdiction of US courts. Specifically, the foreign companies, it is argued in the Opinion, who physically hold the "indicia" outside the US territories on behalf of the US investors, are considered to be under the jurisdiction of the US courts because they have signed contracts obliging them to transfer those "indicia" freely to the US if asked to do so by the US based fiduciary with whom they signed such contracts. But US citizenship is just such a contract placing the individual under direct US courts jurisdiction, and thus he/she should be able to serve as a plan trustee as per 404(b) requirements. Any opinions on this matter ? Does anyone know if the DOL has come up with any Advisory Opinions or some other instruction regarding this issue ? Any court cases ? Any guidance from any power to be ? or from attorney firms ? From what I suspect, people living abroad are acting as their own solo 401(k) trustees and buying foreign Real Estate while holding on to the foreign deeds at their overseas residence, without worrying whether they violate 404(b) or not. I am nor sure what the trustees of individual IRAs demand in terms of who holds on to the deeds of foreign Real Estate. The IRA trustees are usually US based and distinct from the owner-trustees of the solo 401(k) plans. Thanks many to all who will contribute their opinion.