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Mega Backdoor self directed solo 401k funding
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1 Reply
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I just opened a self directed solo 401k with Fidelity. It’s not eligible for direct transfer from my personal bank account. I want to make monthly transfers from my personal account to my pre tax/ Roth /voluntary after tax accounts. Do I have to open a non prototype account with them? If yes, what is the best option? Is Cash management account a good option in my case?
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1) For our clients who wish to have accounts at Fidelity, we prepare the paperwork to open non-prototype accounts (i.e. brokerage accounts at Fidelity opened for a third-party plan such as our plan which does allow for Pre-tax, Roth and/or After-tax (Mega Backdoor Roth) Solo 401k contributions).
2) Based on experience and client feedback (as well as information posted on Fidelity’s website), one can deposit funds via Direct Deposit (ACH) into a non-prototype (investment only) account at Fidelity (which is the type of brokerage account set up for a third-party Solo 401k plan).
Please see more regarding the Direct Deposit (ACH) option on this page (which is also posted on Fidelity’s website): Making the Solo 401k Voluntary After-Tax Contribution to the Fidelity Investments Non-Prototype (Investment Only) Brokerage Account – My Solo 401k Financial
Given this experience and the information posted on Fidelity’s website, it seems that the Fidelity representative was mistaken and/or would have responded differently if asked directly about the Direct Deposit option posted on their website (note that the Direct Deposit information posted on Fidelity’s website specifically mentions how to make such deposits for account numbers beginning with “Z” which is typically how Fidelity assigns account numbers for non-prototype accounts).
3) Based on experience and client feedback, Fidelity requires that cash management accounts are opened under the name of a natural person and SSN. The Solo 401k funds can’t be in an account that is under your SSN. As such and given Fidelity’s requirement, you would not be able to put funds in such an account.
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