Can young owner terminate solo 401(k) plan, convert all to Roth IRA, then adopt new plan?

[Guest Kentuckiana]

I have a young business owner who wants to convert all his current retirement savings to a Roth IRA while the income restrictions are lifted. He can't take an in-service distribution. Can he terminate his solo 401k, convert the assets, and then start another plan at a later date?

[Tom Poje]

I believe it depends on how soon after the funds are distributed the new plan is started. my understanding of the rules for Successor plan's is that you have to wait at 12 months after the distribution is made.

but I could be wrong.

[Guest Sieve]

Tom is correct that the 12-month rule applies with respect to whether the distribution on termination of the earlier plan is a distributable event--i.e., establishment of another plan before 12 months have passed causes the distribution not to have been pursuant to a plan termination.

[Guest Kentuckiana]

Thanks to all! He'll just have to decide whether it's worth sitting out for a year to do the conversion.