I have a custom solo401k and have finished my 2018 tax return and determined the amount of after tax non Roth contribution I can make and have been advised by my TPA to fund the account (a non prototype brokerage account at Fidelity) via sending in a paper check directly to the account rather than using an electronic funds transfer from my business checking account to a Fidelity settlement account and then directly transferring from the settlement account into the final destination (the non prototype brokerage account). What would be the rationale for this? Either way, the funds can be traced from business checking to the final Fidelity account and will not be intermixed with any other funds (the Fidelity settlement account exists solely for this intermediary function and hasn’t/won’t contain any other funds). I’d ask my TPA directly but they’re not reachable on the weekend and I have some time to kill. TIA for the guidance.March 9, 2019 at 12:55 pm MST #197104
Fidelity non prototype accounts can only be funded by paper check. Thats the reason. You can mail it in or can drive it to a local fidelity branch if you want it to go in faster.
I can fund my individual savings Fidelity account (x type) electronically from my bank. I can then transfer from the x type into the z type (the non Roth after tax) as far as I can see. Maybe I’m wrong.March 9, 2019 at 2:15 pm MST #197128
I can fund my individual savings Fidelity account (x type) electronically from my bank. I can then transfer from the x type into the z type (the non Roth after tax) as far as I can see. Maybe I’m wrong.Click to expand…
Yes, you are wrong, it won’t allow you to transfer it into the non-prototype account. Please let me know if you can actually do it as I have looked into it in the past.
Per the rep I just spoke to on the phone, it can be done. TBD if that’s reality.March 9, 2019 at 2:33 pm MST #197131
Per the rep I just spoke to on the phone, it can be done. TBD if that’s reality.Click to expand…
Please let me know how it works out, as it would be easier for me too without having to drive to the branch. On the other hand the hassle of having to drive there makes me max out the contribution in January so I only have to go there once for the whole year
Absolutely. I’m not overly optimistic. Pretty sure I was speaking to a ‘B team’ rep, but I’ll give it a go and let you know.March 9, 2019 at 3:29 pm MST #197147GasFIREParticipantStatus: PhysicianPosts: 151Joined: 01/08/2018
@krentist – Dreamgiver is correct. I also have a custom solo 401k with a NP Fidelity brokerage account. Most of my discussions were in-person with a rep at my local Fidelity branch office. Among other things he emailed me this form for contributions along with account application:
I have done many online transfers among my different accounts at Fidelity. On the website Transfer Box all of my accounts are on the transfer-from drop-down list. My NP account is not listed as a choice on the transfer-to drop-down list. Sadly, my experience with the 800# customer reps is that their advice is sometimes incorrect on non-standard accounts like this. The Retirement department would more likely be more accurate, but they are only available M-F.Brains428ParticipantStatus: PhysicianPosts: 147Joined: 11/09/2017
If you called today, you got the B-team. The guy I talked to was aware that he didn’t know the answer and gave me the number and the time to call back M-F. When I talked to a retirement representative about transferring SEP to solo 401k, he told me exactly what I needed to do and emailed me the forms to fill out, print, and mail. They mail a check, you fill a different form, send check in. Should take about 10 days from start to finish (by finish, I mean being able to pick funds for the account).March 9, 2019 at 10:39 pm MST #197217deeppizzaParticipantStatus: PhysicianPosts: 35Joined: 09/30/2016
I’m also setting up a custom solo 401k plan with a TPA, and will be opening the account through Fidelity. The plan is to direct transfer the funds in the after-tax account in the solo 401k to an existing Roth IRA at Fidelity. Anyone know what the process is in doing that? I’ve been told that it can’t be done online, and required some form.March 10, 2019 at 9:20 am MST #197261spiritriderParticipantStatus: Small Business OwnerPosts: 1515Joined: 02/01/2016
Generally, the method of funding is determined by the type of the business entity and the type of contributions:
- With a sole proprietorship money is fungible, all contributions can come from either the owner’s or businesses accounts. It the sole proprietorship is a single member LLC, it would be better if the contributions came from business accounts
- With a partnership, employee elective contributions and employer contributions must come from the businesses accounts. Employee after-tax contributions could either come from the businesses accounts or from employee’s accounts, but should be deposited by the plan’s administrator. This is subject to any specific guidance in the plan document.
- With an S-Corp, employee elective contributions and employer contributions must come from the businesses accounts. The method of funding of an S-Corp shareholder-employee’s employee after-tax contributions is less defined. There is precious little substantial authority on employee after-tax contributions, but all 401k plans I am aware of with non-owner employees and employee after-tax contributions require those contributions to be deducted from W-2 wages.
There is no mention of after-tax contributions in the entirety of 26 US Code 401 and only this brief snippet in 26 CFR § 1.401(k)-1 – Certain cash or deferred arrangements, (a) General rules -, (2) Rules applicable to cash or deferred arrangements generally -, (ii) Treatment of after-tax employee contributions.
A cash or deferred arrangement does not include an arrangement under which amounts contributed under a plan at an employee’s election are designated or treated at the time of contribution as after-tax employee contributions (e.g., by treating the contributions as taxable income subject to applicable withholding requirements).
My reasonably informed opinion from what businesses with non-owner employees do and this phrase of the only brief snippet in IRS regulations. The safest actions are :
GasFIREParticipantStatus: PhysicianPosts: 151Joined: 01/08/2018
- Employee after-tax contributions for a given tax year in sole proprietorships and partnerships have until the tax filing deadline including extensions, because the contributions only become after-tax when a deduction is not taken on the self-employed individual’s tax return.
- Employee after-tax contributions for a given tax year in S-Corps should be deducted from the shareholder-employee’s W-2 wages with a pay date on or before 12/31. Unless your plan document explicitly allows an employee to make direct employee after-tax contributions. You should follow those requirements as to funding and timing.
I’m also setting up a custom solo 401k plan with a TPA, and will be opening the account through Fidelity. The plan is to direct transfer the funds in the after-tax account in the solo 401k to an existing Roth IRA at Fidelity. Anyone know what the process is in doing that? I’ve been told that it can’t be done online, and required some form.Click to expand…
This is the form:March 10, 2019 at 1:18 pm MST #197310
So I talked to my TPA and he gave me instructions on how to establish ACh from my business checking into Fidelity non prototype accounts. I’ve started the linking process. If this works, may save y’all some hassle. I’ll update w success or failure. But so far I’m being advised it’s possible…March 15, 2019 at 5:38 pm MST #198770TanglerParticipantStatus: PhysicianPosts: 77Joined: 08/23/2018
I also just opened a fidelity solo 401k. I just had to mail a check in. They said it was the only way.
i Won’t lie, I’m terribly curious to see if my TPA has advised me correctly given all the feedback from others saying this isn’t possible.
FWIW, the accounts are now linked electronically and I’ve sent funds from my bank to the brokerage non prototype account with an anticipated clearing date of 3/19. So I’m either going to find out Tuesday that it worked or will be frantically searching for where my money went.