Splitting Solo 401(k)

[Guest hk73]

Business owner has a solo 401(k) that has a Roth sub-account which contains employee deferrals made under the Roth provision. Because of investments choices, owner wishes to transfer assets to another 401(k) provider (Fidelity) that has no Roth option. Business is active, so terminating plan and rolling assets into IRAs and/or starting new 401(k) and the like are not an option (correct me if there's any way to do this). Is there any conceivable way to "split" the account and transfer the non-Roth portion only to the new provider? Plan documents are prototype documents and don't allow for multiple 401(k) accounts if I'm not mistaken. Any idea to accomplish the goal would be helpful. Or is business owner "stuck" with providers offering Roth for the entire account assets once any Roth contribution has been made. thanks.

[401king]

Business owner has a solo 401(k) that has a Roth sub-account which contains employee deferrals made under the Roth provision. Because of investments choices, owner wishes to transfer assets to another 401(k) provider (Fidelity) that has no Roth option. Business is active, so terminating plan and rolling assets into IRAs and/or starting new 401(k) and the like are not an option (correct me if there's any way to do this). Is there any conceivable way to "split" the account and transfer the non-Roth portion only to the new provider? Plan documents are prototype documents and don't allow for multiple 401(k) accounts if I'm not mistaken. Any idea to accomplish the goal would be helpful. Or is business owner "stuck" with providers offering Roth for the entire account assets once any Roth contribution has been made. thanks.

What is the age of the owner? May be an option to rollover the Roth balance to a Roth IRA if he can meet in-service distribution requirements.

[ETA Consulting LLC]

This would should be pretty easy provided that your document doesn't contain a provision providing that assets remain exclusively with the provider in order to rely on the prototype document's opinion letter. Just create a Self Directed Brokerage Account in the name of the 401(k) Plan. Unlike any other SDBA, this account would house only the Roth Deferral Amounts. The remainder of the platform could be used for all other amounts (including the pre-tax deferrals). Remember, a plan asset is an asset of the plan regardless of whatever platform it is on. You'd only have to ensure you count these amount properly any any reporting (e.g. Form 5500 EZ if applicable, and distribution taxation for amounts from the Roth Source). There's always flexibility on how the plan is recordkept; you can create a different brokerage account for each separate source of funds while ensuring you deposit the appropriate amounts to each source. All you have is a recordkeeping issue; not a plan design issue.

Good Luck!

[Guest hk73]

This would should be pretty easy provided that your document doesn't contain a provision providing that assets remain exclusively with the provider in order to rely on the prototype document's opinion letter. Just create a Self Directed Brokerage Account in the name of the 401(k) Plan. Unlike any other SDBA, this account would house only the Roth Deferral Amounts. The remainder of the platform could be used for all other amounts (including the pre-tax deferrals). Remember, a plan asset is an asset of the plan regardless of whatever platform it is on. You'd only have to ensure you count these amount properly any any reporting (e.g. Form 5500 EZ if applicable, and distribution taxation for amounts from the Roth Source). There's always flexibility on how the plan is recordkept; you can create a different brokerage account for each separate source of funds while ensuring you deposit the appropriate amounts to each source. All you have is a recordkeeping issue; not a plan design issue.

Good Luck!

thanks, I thought of something along these lines. But I understand there are 2 types of 401(k) providers / custodians / recordkeepers: (1) brokerages or mutual fund companies that act as custodians of the 401(k) (e.g. Fidelity, Schwab) that have prototype plan documents, where the administration is usually free of charge and assets held within the investment choices of the company; (2) accounting services / administrators that create custom or prototype documents and assets can be held anywhere; usually a fee is charged for the recodkeeping and setup of plan documents. In the first case, I'm not sure where exactly to look for the fineprint; I do know however that asset transfers out of the account are generally reported on information returns. Furthermore, I have something in the back of my mind that two plans can usually not "co-exist" for one business, unless specifically outlined in the plans. So it appears not easy to "split" the assets. If anybody has specific experience, would be glad to hear, thanks!

[Bird]

Yeah, I think for practical purposes you are stuck with either "free" providers who offer Roth or going with a more customized approach where you pay someone for a document.

I honestly don't know if those simple prototypes that they use require theirs to be the only plan; I don't really think so - just that all of the assets of the plan be housed with the custodian sponsoring the prototype. So I think it is possible to have two plans and split the money as you suggest. But (for me) the effort of poring over the document(s) (and the effort of just getting the whole document(s) in the first place!) to make sure that everything would be ok in this scenario isn't worth the time/trouble/expense of just writing a "custom" document.