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Did You Know You Could Act As A Solo 401k Trustee For Your Individual 401k?

Who would be the best trustee for your Individual Solo 401k?  You WOULD!!

Unlike an IRA, with an Individual 401k you do not need a custodian or trustee; you may act as your trustee, which is an attractive feature of Individual Solo 401ks. With an Individual 401(k), you do not need to have a Custodian or 3rd party administrator; you may act as your trustee.  The Individual 401k is surprisingly easy to administer yourself and acting as your trustee is not as difficult as it may first appear. As the trustee of your account, you are merely responsible for the day-to-day operations of the 401(k).  As part of your package, we provide you with all of the tools that you need to become your trustee.

So, What Does a Trustee For an Individual Solo 401k Required Do?

  • As trustee, you will be responsible for all of the record keeping and IRS reporting for the 401k.
  • Setting up the Individual Solo 401k checking account with a financial institution – The 401k will need a checking or brokerage account where all the 401(k) funds will be held. This can be at any financial institution of your choice and will be set up in the name of the 401k using its EIN.
  • Rolling over funds into the 401k – Sunwest Trust will provide you with all the forms that you will need to administer the plan yourself. You will use the Rollover Request Form to rollover funds from previous IRAs or 401(k)s.
  • Keeping track of investments and contributions – You will also need to keep track of any contributions, distributions, investments, loans, etc. that the plan makes.  If you ever get audited, it will be important for you to be able to account for all or the money coming into or going out of the 401(k) plan. We recommend that you keep a spreadsheet on Excel or use something like Quick Books to keep track of all of your investments and run your information by a competent tax professional.
  • Also, it’s imperative you keep track of what contributions made to the account are traditional (tax-deferred) contributions and those that are Roth (after-tax) contributions.
  • Signing on behalf of your 401ks for investments – As the trustee of the Individual Solo 401k, you will be responsible for signing all investment documents. The investments will be purchased in the name of the 401(k), but you will sign as trustee.
  • IRS filing – As far as IRS reporting goes, there isn’t a whole lot to it. You are not required to file anything for your solo 401k until it has reached a value of $250,000. When your solo 401k reaches $250,000, you will be required to file a 5500EZ on an annual basis for the 401(k) with the IRS. However, at the time of this writing, it is not until you reach the $250,000 mark that you need to file anything with the IRS. However, that being said, we highly recommend that you still check with a CPA or 3rd party tax professional to make sure that you properly report contribution and distribution transactions flowing in and out of the account throughout the year.

As you can see, becoming your trustee is not nearly as cumbersome as you might initially think, but again this is a basic list of items. In the end, managing your just keeping a record of your 401(k) and making sure to do your IRS reporting when it is appropriate.  As always, we recommend finding a good CPA. Having a knowledgeable 3rd party tax professional in your corner will make your Individual 401(k) experience seamless and painless as possible.

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.