Solo 401(k) questions

[UM1234]

1. Client has high income and wants to fund a Roth IRA each year by making a nondeductible Traditional IRA contribution and immediately converting it to Roth. However, client has pre-tax dollars in a Traditional IRA, and the presence of these pre-tax dollars prevents client from converting a nondeductible Traditional IRA contribution tax-free. Assume client does not have a qualified retirement plan account through a current job that could accept a rollover of these pre-tax IRA dollars. Client is not self-employed. However, is it permissible for client to establish a solo 401(k) just for the purpose of accepting a rollover of the pre-tax IRA dollars, so that annual nondeductible Traditional IRA contributions can be converted tax-free?

2. Same situation as #1 except client has an LLC for a small amount of teaching work that yields $1,000 or less of income per year. Seems more likely that this client can set up a solo 401(k), but client is not likely to make any ongoing contributions from this small amount of income, so the purpose of the solo 401(k) is still just for the purpose of accepting a rollover of the pre-tax IRA dollars, so that annual nondeductible contributions can be converted tax-free. So is a solo 401(k) permissible in this case?

Thank you very much for any thoughts you can provide!

[Jim Chad]

You are correct in pretty much everything you seem to be thinking. The client who is not self employed cannot set up a Solo 401(k).

The client that has an LLC can set one up. I suggest he put 20% of his self employment income into it every year to meet the requirement of " expectation of ongoing contributions". On the other hand, as a Roth deferral he could put in more than 90%.