SEP-IRA Direct Rollover to Solo 401(k) Then Use Pre-Tax Funds

[MICHAEL A.]

Good Day Everyone:

First and Foremost, thank you to Mark and George, plus all of their helpers. Your company provides a very valuable service. In the spirit of continuing to provide that value, I respectfully ask the following questions:

Fact Pattern

Opened a Solo 401(k) through My Solo 401(k) Financial several years ago and have been funding it with Mega Backdoor Roth contributions (all Roth) at a major brokerage house (# 1). Also own a SEP-IRA at another of the big brokerage houses (# 2). Questions:

A. Even though the SEP-IRA is pre-tax but is not a pre-tax 401(k) account, can I roll the SEP-IRA balance into my Solo 401(k) maintained by your company?

B. Assuming the answer to A. above is that a pre-tax to pre-tax direct rollover is allowed tax and penalty free regardless of designation as a SEP-IRA (pre-transfer) to 401(k) (pre-tax sub-account but not designated as SEP-IRA), can pre-tax account money that then resides in brokerage house #2 (since all moved over from #1 to #2 into a pre-tax sub-account) then be used to make traditional loans to unrelated third parties?

Thanks a Ton !

MICHAEL A.

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[MICHAEL A.]

Oops! Small correction to the narrative/questions below as originally written and posted: Brokerage house #1 holds the pre-tax SEP-IRA balance. Brokerage house #2 holds three sub-accounts, all designated according to Mega Backdoor Roth protocol.

Restated questions: Is movement of all or part of SEP-IRA to a pre-tax 401(k) sub-account (that is clearly not an IRA account but instead a pre-tax 401(k) account) an OK thing to do without tax or penalty? Secondly, can one then use pre-tax money that has been moved into the Solo 401(k) to make loans to unrelated third parties?

Thank You. . .a BUNCH!

MICHAEL A.

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[Mark Nolan]

Great questions.

1. Yes, pre tax SEP IRA funds may be transferred to the pre tax solo 41k (to the existing pre tax brokerage account currently setup for the solo 401k) and it will still qualify as a non-taxable direct rollover. https://www.mysolo401k.net/consolidating-retirement-plans-using-solo-401k-plan/

2. Yes, once the SEP IRA funds are directly rolled over the solo 401k, they will now be deemed solo 401k funds and the solo 401k allows for investing in alternative investments such as real estate, notes, tax liens, precious metals, and cryptocurrency.

Mark Nolan

Compliance Officer

Contact

1-800-489-7571 www.mysolo401k.net