Resources > News>Steps To Follow After Setting up an Individual 401k With Sunwest Trust

Steps To Follow After Setting up an Individual 401k With Sunwest Trust

Follow These 4 Steps to Setting up an Individual 401k

Individual 401ks are often also referred to as:

  • Solo 401ks
  • Self Employed 401ks
  • i401k plans
  • Uni K’s

Step 1: To Setting up an Individual 401k – Establish an EIN For Your Account

Sunwest Trust, Inc. is an IRS-approved prototype plan sponsor for Individual 401k accounts.

Unlike self directed IRAs, with an Individual 401k, you do not have to have a custodian for your account.

In fact, you may act as the trustee for this qualified plan. The individual 401k  plan will have an Employer Identification Number (EIN), which will be different from the EIN you use for your company. It must have its own EIN to help the IRS distinguish between the individual 401k plan and your business.

Therefore, the first thing you will need to do is obtain an EIN online for the new plan using the instructions that we provide for you in your package directly on the IRS website.

Step 2: Set up a Checking Account

After you set up your EIN, you will need to set up a checking account for the i401k plan at the bank of your choice. All contributions, rollovers, and investments will go through this checking account you set up for the 401(k).

Here’s what you should take with you to open the checking account for your individual 401k:

– Your letter from the IRS establishing your tax ID number
– Your Basic plan document
– Summary plan description

The following three items are found in the packet we send you.
– Adoption agreement
– Your articles of organization for your company
– Your business operating agreement

You may not need all of these items when opening your bank account, but you should consider arriving at the bank all this documentation to save yourself from having to make extra trips to the bank. The checking account will need to be set up in the name of the 401(k) and using the 401(k)s EIN.

In the end, it doesn’t matter what type of checking account the bank sets up on your behalf, just as long as they set it up in the name of the 401(k) and using the 401(k)’s Tax Identification Number. Some banks will set it up as a Trust checking account, and others will want to set it up as a sub-account of your business account. Again, any account is fine as long as you’re using the 401(k) name and EIN. You may even open a brokerage account if you would like.

Since Individual 401(k)s are a relatively new product, some banks might get confused when you go to open the account. However, make sure the bank understands you are the trustee for the account and the bank has no obligation to do any filing or reporting on behalf of the 401k.  All filing and reporting are the responsibility of the Individual 401k trustee and not the bank.

The account is required to file a form 5500EZ.

Once your 401k plan accumulates $250,000 in cash and assets, Form 5500EZ is required annually. It’s relatively straightforward to fill out. The form can be downloaded directly from the IRS website. If you need help completing the form 5500EZ, speak to your CPA.

If you are having difficulty establishing your account and are willing to use Wells Fargo as your bank, then we have a contact there that can set up the account for you with no problems. Just call or email me and I can put you in touch with him.

Step 3: Fund Your Bank Account

After you establish the account, you will need to fund the account. The account can be funded by making contributions, rolling over other 401k or IRA funds or a mixture of both. You will use the rollover request form that can be found in your 401k packet. Once your 401k is funded, you may begin making investments in a self directed fashion. Please be sure to follow all of the investment rules and ensure that everything goes through your 401k checking account.

Step 4: For Personalized Investment Help With Your Plan, Consult Professional Advisory Support

Again, if you have any questions about this information or on a particular investment you have in mind, please speak with your CPA or tax professional. You may also reach Sunwest Trust regarding any administrative query at (800) 642-7167.

Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.