SoloK Assets for Roth and Pretax in Single UniK Account
Several years ago we setup a SoloK for a client and she has made both Roth and pretax contributions each year. The client wants to distribute assets now and the plan administrator tells us now that, by regulation, the pre-tax and roth assets had to be managed in separate brokerage accounts. This is the first mention of this even though they knew that plan contributions were being made to a single brokerage account all along. The administrator is not offering any solutions for resolving the issue at this point and I am looking for alternatives. I believe other custodians deposit Roth and Pretax into a single account, so I question their premise. First question–is it really prohibited to deposit Roth and Pretax into a single account? Question 2: Are there penalties that we need to be aware of and can we avoid them? Question 3: Any suggestions on how to successfully resolve this would be greatly appreciated. Thank you!
Permalink Submitted by mk foss on Wed, 2014-10-01 16:49
I think that many custodians track Roth and pretax amounts with accounting entries instead of physical separate accounts. At least they don’t offer separate investment choices for the Roth and pretax amounts. No employer match or profit sharing contribution can be added to the Roth portion and the Roth earnings need to be calculated separately from the earnings on pretax deferrals, employer match and profit sharing contributions (although those all can be combined). You should be able to answer yes to the following: