Solo 401k in-service rollover to IRA
We have a client who was previously making contributions for a solo 401k and then rolling those assets to an IRA each year. Is this allowed? I can’t find anywhere in the tax code where it says this is allowed unless the plan is terminated or the participant is over 59 1/2.
Permalink Submitted by Alan - IRA critic on Tue, 2014-08-05 23:49
The elective deferrals cannot be rolled out prior to 59.5 or plan termination, so this has resulted in a plan failure. I do not know what actions need to be taken now to correct this error. One possibility is to amend the plan if it does not already allow rollovers from IRAs, calculate the approximate amount of earnings on these past rollovers and then roll that amount from the IRA back into the plan.