
ANSWER: With respect to a solo 401k, the TPA has similar roles to that of the Trustee (i.e., among other items, has the authority to sign distribution requests and investment directives).
Thanks John, CPA in Wisconsin
![]() QUESTION: My client is asking about a third party administrator which I have not heard of before. Have any of your clients had to ask for this before? ANSWER: With respect to a solo 401k, the TPA has similar roles to that of the Trustee (i.e., among other items, has the authority to sign distribution requests and investment directives). Thanks John, CPA in Wisconsin
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![]() Does there have to be separate solo 401k trust brokerage accounts established individually for each participant? QUESTION 1: Does there have to be separate trust brokerage accounts established individually for each participant? I assumed we would be able to hold investment property in the name of the trust, and one administrative function of the trustees would be to keep track of allocations. ANSWER: Yes each participant must setup a separate brokerage account to hold his or her incoming transfers and/or annual solo 401k contributions. The best way to understand the separate account per solo 401k participant account concept is to compare it to 401k plan provided by a full-time employer. Such as the Intel 401k provided to their employees whereby each participant participates in the Intel 401k plan but each has a separate holding account to hold their annual contributions. QUESTION 2: But that may not be possible. If two accounts are mandatory can each participant can have 50% of each property investment? If so is it titled: Xyz 401k FBO Jane And Xyz 401k FBO Jon How about if Jane only has 20% and Jon 80%, assuming that's possible. ASNSWER: When taking title to a solo 401k investment such as real estate, title to the property can be taken just in the name of the solo 401k, or in the name of the solo 401k fbo each participant. Here are some examples: EXAMPLE 1: Jane has $60,000 of solo 401k funds Jon has $40,000 of solo 401k funds The property costs $100,000 Title to the property would be taken as follows: Xyz Solo 401k fbo Jane, 60%; Xyz Solo 401k fbo Jon, 40% Therefore, the profits and expenses associated with the solo 401k owned property would be divided 60/40 based on the ownership percentages above. EXAMPLE 2: Jane has $60,000 of solo 401k funds Jon has $40,000 of solo 401k funds The property costs $100,000 Title to the property would be taken as follows: Xyz Solo 401k However, just like in example 1 above, the profits and expenses associated with the solo 401k owned property would be divided 60/40 based on the ownership percentages above. Thanks. Charles in Colorado |
AuthorMark Nolan has been active in the 401k and IRA industry for over 18 years. Working as a 401k administrator at Nationwide Insurance Company; then working as a Compliance Officer and Manager at self-directed IRA/401k custodian companies such as Trust Administration Services Corporation (now owned by Equity Trust Company), to IRA Services Trust company. Mark is currently the Compliance Manager at MySolo401k.Net. Archives
July 2020
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