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Solo 401k Provider – How to Choose the Best

Solo 401(k) provider

Choosing the best provider of the Solo 401k is an important decision that should be researched thoroughly. Below are several tips to help you select the best Solo 401k provider for your self-employed or small business retirement plan.

9 Tips to Choose the Best Solo 401k Provider

1. Work with a Tax & ERISA Professional

Several companies advertise themselves to be the best Solo 401k providers. Yet in most cases, the people who draft your Plan documents and offer advice aren’t tax attorneys or even tax professionals.

This is why it’s important to look for an experienced tax and ERISA professional as your Solo 401k Plan provider. This helps to ensure that your individual 401(k) plan will be properly set up. Additionally, it ensures that the Plan remains in full IRS compliance.

The Solo 401k Plan is based on rules found in the Internal Revenue Code (IRC). Oftentimes, the IRC rules can be complex for a non-tax attorney. Therefore, it’s advisable to work with a Solo 401(k) Plan provider, like IRA Financial Group to establish your IRS-approved Solo 401k Plan.

When you rely on the advice of a document processor or non-tax-professional, this can place your retirement future at risk. Oftentimes, plan participants have unknowingly violated IRS rules, such as the Prohibited Transactions, when operating their Plan. This is because an unqualified plan provider representative gave inaccurate tax advice or drafted the plan documents incorrectly.

Don’t let this happen to you. Work with the best Solo 401k Plan tax & ERISA professionals. This will be a team that has specific training on the special tax aspects of the Plan. They will properly establish and maintain your plan according to IRS rules and regulations.

2. The Best Solo 401k Structure

Not all Solo 401k Plans are the same. Most Plans from banks or financial institutions are not self-directed. In other words, these companies will restrict you from making alternative asset investments. Your only option will be traditional investments that you may not understand, like stocks, bonds, and mutual funds.

When you adopt a Solo 401k, your plan must offer all the IRS options available for qualified retirement plans. This includes the ability to make non-traditional investments, like real estate, precious metals, and cryptocurrency.

IRA Financial Group offers an open architecture Solo 401k Plan. What does this mean? You can make any IRS-approved investment without custodian consent. As trustee of your Self-Directed 401(k) Plan, you have “checkbook control.” This gives you full control over your retirement plan funds and assets.

Learn More: What are Alternative Investments?

3. Take Advantage of Your Right to Borrow up to $50,000

Not all Solo 401k Plans include a loan feature, which is approved by the IRS. However, IRA Financial Group’s Plan allows you to borrow up to $50,000 or 50% of your account value – as you’re entitled. This loan can be used for any purpose: pay credit card bills, mortgage payments, or use it for personal/business investments.

You must pay the loan back at least quarterly at the minimum prime interest rate over a five-year period. However, you do have the option of selecting a higher interest rate.

Read More: Solo 401(k) Loan

4. Be Sure You Have a Roth Option

Many Plan providers do not allow for Roth (after-tax) contributions. At IRA Financial Group, your Solo 401k Plan will contain a built-in Roth sub-account. You can make contributions to your Roth Solo 401k plan without any income restrictions.

Additionally, most plan providers do not allow for in-plan Roth conversions or rollovers. Whereas, IRA Financial Group’s Solo 401k Plan allows for in-plan Roth conversions. However, the Plan participant must pay income tax on the amount converted.

5. Ongoing Tax & 401(k) Plan Support is Crucial

After you establish your Solo 401k Plan, that doesn’t mean you no longer need ongoing tax and ERISA support. As you begin administering your plan, whether it involves employee deferrals or profit-sharing contributions, you should have the ability to consult with a tax professional. However, many Solo 401(k) plan providers are nowhere to be found after the plan has been established.

The ongoing maintenance of the Solo 401k plan is a crucial element to ensure your retirement plan remains IRS-compliant. Our tax professionals are fully trained on the special tax aspects of the Plan and are on-site to keep it in full IRS compliance.

6. Take Control of Your Solo 401k Plan from the Plan Provider

Solo 401k Plan providers may require that you hold the plan assets at their institution.

With IRA Financial Group’s Self-Directed 401(k) Plan, you can hold the plan assets at the bank of your choosing and gain “checkbook control” over the retirement funds. With IRA Financial Group, making an investment is as easy as writing a check.

Learn More: What is Checkbook Control?

7. Stay Away from Solo 401k Providers who Outsource Their Plan Maintenance Services

Most Plan providers do not assist or offer advice with respect to the maintenance and administration of a Solo 401k Plan. This includes the completion of the IRS Form 5500-EZ. They generally refer all questions to an outside tax attorney or accountant.

IRA Financial Group offers all of its Solo 401k Plan clients direct access to its in-house retirement tax professionals regarding maintenance or administrative questions concerning the plan.

Whether it’s answering a question about a plan feature, investment, an update in the law, or help completing the IRS Form 5500-EZ, you will work one-on-one with a retirement tax professional who are familiar with your plan and retirement goals.

8. Stay Away from Solo 401k Providers with Excessive Annual Fees

Since most Solo 401k Plans have less than $250,000 in plan assets, there would be no annual filing requirement for the plan. So, why pay excessive annual administration fees to a plan provider who will not be offering you or your plan any value or services?

Even if your Plan has an excess of $250,000 of plan assets, the IRS Form 5500-EZ is simple to complete and shouldn’t be costly.

9. Don’t Take Tax Advice from a Salesperson – Talk Directly with a 401(k) Plan Tax Professional

Oftentimes, a salesperson or representative of a Solo 401k Plan provider will offer you tax or ERISA guidance with respect to a 401(k) plan feature or an investment without adequate knowledge or expertise. Make sure you only receive plan-related advice or information from a specialized 401(k) plan tax professional.

Too often, plan participants make improper plan contributions or invest in a prohibited transaction because they were misled by a plan provider representative who was not qualified to provide proper tax advice regarding the unique features of the Plan.

When you work directly with a 401(k) plan tax professional who has been specifically trained on the special tax aspects of the Solo 401k Plan to establish and maintain your Plan, you can guarantee your plan will remain in full IRS compliance and that you will not be engaging in any plan activities not approved by the Plan or the IRS, such as Prohibited Transactions.


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