solo 401k

Submitted by abraham boznick on Sat, 2023-12-09 04:54

If a person is 73 years and will open a single person LLC (he has never been part of any LLC before), and begins to earn some income in this LLC. Can this person avoid RMD distributions from this solo 401k after he transfers funds into this solo 401k from other of his 401k or IRA accounts. Please note that at the year he turned 72 he had no solo 401k.



Submitted by Alan - IRA critic on Sat, 2023-12-09 16:08

  • Technically, RMDs can be avoided in this scenario, although this is an aggressive strategy and the IRS would likely want to see the LLC creating some level of income to appear more than an entity created to avoid RMDs. Because the 5% ownership determination is made only one time for the plan year in which the owner turns 72 (born in 1950) and the business did not exist in 2022, the person is not treated as a >5% owner and can therefore take advantage of the “still working exception” to delay RMDs. 
  • However, the year in which other plans or IRAs are rolled into the solo K will require that the current year RMD for those plans be distributed prior to rollover. Deferral of RMDs on those funds does not start until the year after the solo K accepts the rollovers. 

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