Retirement plan documents are a mystery! If you’re not an attorney or tax specialist, most of the paperwork is confusing. It’s written in the language affectionately referred to as ‘legalese’. Not only that. Not all Solo 401k plans are created equal.
But what exactly is contained within the Solo 401k document system? Let’s cover that here.
The below documents are included in all Solo 401k plans provided by Nabers Group.
- Adoption Agreement: Your adoption agreement is similar to an Operating Agreement. The Adoption Agreement lays out the terms and stipulations of how the 401k plan is adopted by your business. Your business is also known as the adopting employer.
- Action by Board of Directors: This resolution formally decides to use the Solo 401k plan in your business. The document also discusses how the board of directors understand the contribution limits of your Solo 401k plan. Finally, this document formalizes appointing the owner of the business (usually you) as the Solo 401k plan trustee.
- Plan Document: Your plan document is a Defined Contribution Plan. The plan document lays out the rules and guidelines of your Solo 401k. These rules include definition of terms, contributions, distributions, vesting, accounting, fiduciaries, and beneficiaries. This 129 page document is the meat and potatoes of your Solo 401k plan.
- Plan Specifications: The plan specifications document lists the specifics of this plan. These might include: who is designated as the employer, participant and trustee; Eligibility and Service Provisions, Date Provisions, Contribution limits and definitions, Vesting Provisions, Distribution Provisions, and other various Administrative Provisions.
- Appointment of Trustee: The appointment of trustee formalizes your role as Solo 401k trustee. Print and sign this page and keep it in a safe place. Your spouse may also be listed as co-trustee.
- Trust Agreement: The Solo 401k is a Defined Contribution trust. This document discusses your rights, powers and duties as Trustee. The agreement also reviews how to administer trust assets and how to amend or terminate your Trust. It further discusses that the Trust is to be used in conjunction with the Retirement Plan and Adoption Agreement.
Making It Official
- Opinion Letter: This letter direct from the IRS affirms that your Solo 401k is a qualified retirement plan. Keep this letter in a safe place with your plan documents. You may need this letter if/when you rollover funds into your Solo 401k. Similarly, have the letter handy when investing with Solo 401k funds.
- Beneficiary Designation Form: With any trust or retirement plan, you’ll designate beneficiaries. In the event of your death, the beneficiaries will receive your assets. 401k plans typically require a primary beneficiary. You may also add a contingent beneficiary. Clients typically nominate their spouse and/or children or other family members as beneficiaries. If you designate someone other than your spouse as a beneficiary, your spouse will need to sign off on that nomination. Always work with your estate planner, legal counsel and/or CPA to complete the beneficiary designation form.
- Contingent Successor Trustee: Your successor trustee is who will become trustee of the plan in the event of your passing. Trustee(s) are responsible for directing the plan and plan investments. Always work with your estate planner, legal counsel and/or CPA to complete the successor trustee form.
- Death Distribution Form: Your spouse and/or beneficiary will use this form to distribute assets after your passing.
- In-Plan Roth Conversion Form: The Solo 401k by Nabers Group automatically includes a Roth component and in-plan Roth conversions. Use this form to document a Roth conversion within your Solo 401k. Complete the form prior to the conversion taking place. Always work with a CPA or qualified tax preparer to complete the form and conversion.
- In-Service Distribution Form: Use this form to document distributions, both taxable and non-taxable, from the Solo 401k plan. This form is used while the Solo 401k is still active and the participant is still working with the employer that has adopted the plan. Distributions might go to the participant or to another qualified retirement plan. Sometimes distributions are called rollovers if the funds go to another retirement plan.
- Required Minimum Distribution Form: This form documents Required Minimum Distributions (RMDs). RMDs begin when the plan participant reaches age 70 ½. Complete this form before distributing plan assets to the participant (you).
Loan and Life Insurance
- Life Insurance Policy: You can buy life insurance with Solo 401k funds. This document summarizes the procedures for purchasing Life Insurance under the plan.
- Loan Policy: You can take a loan from your 401k for any purpose. You can use the funds as a personal line of credit. Perhaps you’d invest in your business, purchase real estate or pay off debts. The loan policy outlines the parameters of taking and paying off the loan.
- Spousal Participation: This document explains how your spouse can participate in your Solo 401k.
- Summary Plan Description: This document summarizes your rights and benefits under the plan. That includes general information about the plan, contributions, participation, vesting, loan procedures and distributions. This is a great document to familiarize yourself with so you have a basic understanding of the workings of your Solo 401k plan.
- Rollover Acceptance Form: Complete this form when accepting a rollover. The document reflects your Solo 401k plan accepts the direct transfer. Direct rollovers are generally not taxable. Work with your CPA or tax professional to assist in completing this form correctly and then store with your records for safekeeping.
While the list is quite extensive, the average Solo 401k owner probably doesn’t need to read each and every document. The total list compromises 300+ pages after all! The Summary Plan Description is very helpful in familiarizing yourself with the workings of the Solo 401k plan and we recommend that all Solo 401k owners read through it.
After you set up your plan, you’ll receive a packet of signatures pages. This makes opening your account and starting the plan easier. For Nabers Group clients, we’ve extracted all the pages that require signatures from the entirety of the plan documents. We’ve then put them in one easy to sign packet. Once you sign the pages, store them in a safe location. Then, your Solo 401k plan is officially active!
If you’re ready to get started with your own Solo 401k, just give us a call at 877-SOLO-401k, or schedule a call with a Solo 401k Expert here!