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I want to set up a Solo 401K. My understanding is I need a…

I want to set up...
I want to set up a Solo 401K. My understanding is I need a company or attorney or someone to do this for me. I see there are companies on the internet that charge about $1000 to set up and $200/year to administer. Its my understanding that a Trust is created, and then I am the Trust administrator so I can go to the bank and create an account under the Trust and start to put money in from business profit and IRA/401K Roll-overs. If I understand all this right, my question is; Do I need to pay a company $1000 one-time and $200/year to set this up? or can I just do it all myself?
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Answered in 5 minutes by:
3/9/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,643
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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My name is***** will assist you today.

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You may establish and maintain the plan yourself.

How to establish and set up the plan overview is covered in IRS Publication 560

https://www.irs.gov/publications/p560

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Setting Up a Qualified Plan

There are two basic steps in setting up a qualified plan.

  1. First you adopt a written plan.
  2. Then you invest the plan assets.

You, the employer, are responsible for setting up and maintaining the plan.

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The written plan can be an IRS-approved master or prototype plan offered by a sponsoring organization. Or it can be an individually designed plan.

Written plan requirement.

To qualify, the plan you set up must be in writing and must be communicated to your employees. The plan's provisions must be stated in the plan. It isn't sufficient for the plan to merely refer to a requirement of the Internal Revenue Code.

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Most banks that offer brokerage service will assist you in establishing a one-participant 401k plan for little to no cost.

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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Customer reply replied 4 months ago
Thanks Chad. There aren't any employee's, which is a requirement of a Solo 401K. But I suppose I can create a plan if I can find a sample that someone else used. Any ideas where I can find that? But the other part is, why do these companies charge so much one-time and then $200 a year? They tell me if I stop paying the annual than my 401K is no longer legal. for example www.irafinancialgroup.com I'd prefer to just set up my own, but not sure if I can bypass the 3rd party? I am fine to go to a bank and set up, but I am worried I am missing a step. For example, I have to be set up as a 401K Trustee.

Here is a link to the IRS.Gov which will cover in more detail all the information you are looking for, including Pre approved prototype plans.

https://www.irs.gov/retirement-plans/preapproved-retirement-plans

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Why do these companies charge so much? -- No clue, who actually pays the fee. As I said, if you walk into most banks, they will provide the paperwork for you. ---This does take some work, because you generally have to find the retirement account specialist, which there aren't many of.

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The $200 is most likely the cost to maintain your account. Hopefully, they do the annual reporting too.

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A 401K trustee is merely a titling issue, not difficult to establish.

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Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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Our system is indicating that you have asked this question a second time.

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Customer reply replied 4 months ago
oh, I totally missed the response! sorry. let me read this and get back to you.

Please take a moment to accept the answer so that the question may be closed out.

Thank you

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,643
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
Verified
Chad EA, CDFA®, CFP® and 87 other Tax Specialists are ready to help you
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Customer reply replied 4 months ago
Thx. I never posed the question right. Your info was right, but they was because these banks serve as custodian. The companies that charge the big fees set me up as custodian, allowing me to write my own plan that allows a wider range of activity. It’s not as easy to do that, the IRS docs don’t help much. But thx for the info, it helped me get to someone that had info, and I ended up agreeing to pay him $360 to set it all up. Worth it.
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