Author Topic: Solo 401K Provider that allows Mega Backdoor Roth?  (Read 2551 times)

AK

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Solo 401K Provider that allows Mega Backdoor Roth?
« on: September 17, 2016, 07:50:52 AM »
Hi fellow mustachians. Is there a Solo 401K provider that allows for after-tax, non-roth contributions and in-service withdrawals?

I have spent hours researching and haven't found a single source that says go to this provider and do this. The closest I have found is to go to a plan provider, such as Ascensus, and create the custom plan that allows for the mega backdoor roth. Next, open investment accounts for pretax, roth, and aftertax to manage the investments yourself. You become the plan administrator. This requires me to do all the paperwork but I want to avoid that. I'd prefer to have everything with one company and they handle the administration.

I am currently talking to Paychex and they are investigating if they allow this or not. I do payroll with them and have had a great experience with them so far. Their 401K fees are a bit pricey though. They charge 1500 to setup the 401K, 55 per month for maintenance, and .0045% of assets for another fee.

protostache

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Re: Solo 401K Provider that allows Mega Backdoor Roth?
« Reply #1 on: September 17, 2016, 09:43:55 AM »
I wanted this option too, which is why I specifically went for a separate plan and account. I got my plan from MySolo401k.net, then opened accounts at Fidelity. There's been zero paperwork so far, aside from setting it up and one small set of forms to add my wife as a trustee when my business hired her. After total plan assets hit $250k then I'll have to start filing a yearly form 5500EZ, which is two page and the people at MySolo401k will help me fill it out if I want.

As long as you stick with stocks, bonds, and other "normal" investments and you report the rollover transactions on your taxes there's no problem with paperwork or compliance. Compliance becomes an issue if you start doing things that could subject you to UBIT, like real estate investing.

AK

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Re: Solo 401K Provider that allows Mega Backdoor Roth?
« Reply #2 on: September 17, 2016, 01:33:28 PM »
Protostache,

Thanks for the reply. I will check out mysolo401k.

Did not know about the unrelated business income tax so thanks for that nugget. I will stay with low cost, index funds for my 401k investments.

AK

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Re: Solo 401K Provider that allows Mega Backdoor Roth?
« Reply #3 on: September 29, 2016, 07:56:01 PM »
Protostache or someone else knowledgeable,

I gave MySolo401k.net a call and the rep answered all my questions comprehensively. I'm really leaning towards implementing the same thing you did by getting a plan document through them and then using an investment house for the different accounts. Can you elaborate on the paperwork that I'd be responsible for? I.E. the 5500EZ seems fairly straight forward but are the rollover transactions on your taxes hard to implement or is this something my CPA can handle since I will be using one?

Thanks,
AK

protostache

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Re: Solo 401K Provider that allows Mega Backdoor Roth?
« Reply #4 on: September 30, 2016, 01:25:10 AM »
The Finance Buff posted a complete walk through of the process earlier this year.