Is 60 day r/o rule per plan type per year?

Submitted by Brad Bargmann on Wed, 2016-08-17 20:41

Can you withdrawal from an IRA and a Solo 401k at the same time, and contribute to both plans within the 60 days.
…with the idea of funding a cash purchase of property with the proceeds from each withdrawal, then do a cash-out refi and deposit money back into each plan within 60 days (assuming loan funds within timeframe)?



Submitted by Alan - IRA critic on Wed, 2016-08-17 20:55

  • There are different rules here. IRA distributions and rollovers are limited to one per 12 month period for all owned IRA accounts in total. This rule does not affect rollovers where an IRA account is not on each end of the transaction. There is also the 60 day deadline for completing a rollover of a distribution from any plan, and applies separately to each distribution. A solo K plan agreement may not allow for such distributions to be rolled back or even to take such a distribution. Further, a solo K may or may not allow plan loans for certain purposes.
  • Distributions taken for various real estate transactions are very risky because so many situations can develop which delay or scrap potential purchases. It is best to plan for the worst that replacement funds may not be available before the 60 day period ends. (There is a 120 day period for a qualified first home acquisition that falls out). That would result in a taxable distribution and 10% penalty with loss of further tax deferral on the amount distributed. You would not make such a distribution unless you had no other choice, and if you still take the distribution, do it as late as possible so you do not waste any of the 60 day period.
  • No reason you could not take distributions from both plans, but the solo K may not allow distributions and would not allow roll backs, so you would probably have to roll any allowed solo K distribution over to an IRA within the 60 days.

Submitted by Brad Bargmann on Wed, 2016-08-17 21:14

If I do a rollover as a trustee to trustee transfer from the solo 401k to the IRA (which has done previously to keep the 401k under the $250,000 limit to avoid filing form 5500), then do a distribution from the IRA I avoid the problem? 

Submitted by Alan - IRA critic on Wed, 2016-08-17 22:26

First, remember that you cannot roll out your elective deferrals from the solo K before age 59.5 at the earliest. Hopefully, the prior rollouts did not include any elective deferrals. If you still had additional amounts left in the 401k that are not elective deferrals, and you rolled them into an IRA, you could then take the entire distribution from the IRA. But you still have the challenge of getting the money back into the IRA within 60 days, and in addition you cannot have done any other IRA indirect rollover in the prior 12 months (or in the next 12 months either). You WOULD solve the problem of not being able to roll back the funds into the solo K.

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