Can I Roll Roth IRA funds into a Solo 401k Plan?

May 6th, 2011

One is permitted to directly roll over almost any type of pre-tax retirement funds to a Solo 401k Plan. For example, Traditional IRA, SEP, SIMPLE (as long as the account has been opened at least 2 years), 401k Plan funds, 403(b) plan funds can be directly rolled into a Solo 401k Plan tax-free.  The only restriction is the Roth IRA funds (after-tax) are not permitted to be directly rolled into a Solo 401k Plan.  The rational behind this rule is unclear since a Roth 401k Plan subaccount can be rolled into a Solo 401k plan with a subaccount.  Note – most standard Solo 401k Plans will not allow the rollover a Roth subaccount funds even though it is permitted by law.  The reason for this is that allowing such a rollover imposes more burdensome administrative record keeping responsibilities on the Plan Administrator.

If you have a Roth IRA and want to make non-traditional IRA investments, such as real estate, then one always has the option of establishing a Self Directed Roth IRA LLC to make the real estate investment.  Much like a Self Directed IRA LLC or Self Directed IRA Real Estate, a Self Directed Roth IRA will allow the IRA holder to make Roth IRA investments tax-free and without custodian consent.  Actually, in many cases individuals will establish both a Self Directed Roth IRA and a Solo 401k Plan to take advantage of the Self Directed IRA rules while maintaining to make real estate investments with both Roth and pre-tax funds.