Solo 401k Rollover

Solo 401k Rollover.The recipient of an eligible rollover distribution from a Solo 401k plan can defer the tax on it by rolling it over into a traditional IRA or another eligible retirement plan. However, it may be subject to withholding as discussed under Solo 401k Withholding requirement, later. Beginning in 2010, a rollover can be made to an employee's Roth IRA from a Solo 401k plan regardless of the employee's income or filing status.

Eligible Solo 401k rollover distribution.This is a distribution of all or any part of an employee's balance in a Solo 401k plan that is not any of the following.

1. A required minimum distribution.
   
   
2. Any of a series of substantially equal payments made at least once a year over any of the following periods.
   
   
   1. The Solo 401k participant's life or life expectancy.
      
      
   2. The joint lives or life expectancies of the Solo 401k participant and beneficiary.
      
      
   3. A period of 10 years or longer.
      
      
3. A hardship distribution.
   
   
4. The portion of a distribution that represents the return of a participant's nondeductible contributions to the Solo 401k plan.
   
   
5. Solo 401k Participant Loans treated as distributions.
   
   
6. Dividends on employer securities.
   
   
7. The cost of any life insurance coverage provided under a Solo 401k plan.
   
   
8. Similar items designated by the IRS in published guidance. See, for example, the Instructions for Forms 1099-R.
   
   

Rollover of nontaxable amounts. You may be able to roll over the nontaxable part of a Solo 401k distribution to another qualified retirement plan or a section 403(b) plan, or to a traditional IRA. The transfer must be made either through a direct (trustee-to-trustee) rollover to a qualified retirement plan or a section 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to an IRA.

Note. A distribution from a designated Roth Solo 401k account can be rolled over to another designated Roth account or to a Roth IRA. If the rollover is to a Roth IRA, it can be rolled over by any rollover method, but if the rollover is to another designated Roth account, it must be rolled over directly (trustee-to-trustee).

Additional information. For more regarding Solo 401k rollovers, see Rollovers in Pubs. 575 and 590.

Visit Solo 401k Withholding Requirements to learn more.