Of course, you will be working with a plan document sponsor for the establishment of your Solo-K. And the plan document sponsor should certainly be working with IRS-approved plan documents for your plan.
While your plan document sponsor will/should assist you in most or not all aspects of the plan and account creation, it is always important to remember that you are still the legal Trustee of the plan. For this reason, it is important that you are aware of the steps for establishing your plan and account set-up.
The best way to start a relationship is talking. Some plan document sponsors, no criticism intended, will invariably provide you the "10-minute elevator pitch" (ok, it might go 15...it's just a saying!) on how they will assist you. I typically find that this topic is not something that can be easily canvassed in 10 or 15 minutes.
I believe it is important to both PGI and the prospective client to visit so we can confirm what self-directed retirement product (i.e., IRA LLC, IRA Trust, Solo-K, company-sponsored multi-participant 401(k) plan, ROBS plan) is best for them. More importantly, to discuss the "flow" of how the self-directed Solo-K plan plan must be administered by the Trustee (you).
As the saying might go: a well-educated client is a good client!
When you are ready to commence the plan, you can engage PGI's services as the plan document sponsor by simply executing the PGI Solo-K order form through DocuSign.
Your Solo-K plan must have its own EIN. The only purpose of the SS-4 form is for the plan's Trustee to give authorization to a third-party (e.g., PGI) to secure the EIN on the plan's behalf. The SS-4 form is not submitted to the IRS; its only purpose is authorization. A sample SS-4 is at the bottom of this page.
PGI will prepare, register and submit to the Trustee of the plan the IRS-approved Solo-K Plan & Trust documents. The Trust Agreement, identifying you as the Trustee, will permit you, as Trustee and fiduciary, to execute all investments on behalf of the Trust.
As part of our visit, we will talk about the options for the "hosting" of your Solo-K. In short, where will your plan's account be housed...it can't be under the proverbial mattress.
Regardless of which host account option you elect, PGI will work with you on what type of plan account(s) you are needing for the successful operation and administration of your plan.
Option #1 -- Banks and Credit Unions
Any bank or credit union can open the account, but it does not mean that all will. PGI will assist you with what national banks may be easiest to work with and how best to open the account. If needed, PGI will also assist you in speaking with the bank, if wanted. There are pros and cons to opening the plan's "host" account at a bank or credit union. Bottom line: if one bank or credit union does not open the account, "walk down the block" to the next bank or credit union! You will be able to open the account.
Option #2 -- Brokerage Firms
PGI has relationships with nationally-known brokerage firms including Schwab, Fidelity, TD Ameritrade, E*Trade and Capital One. In short, you are able to open your Solo-K account with one of these firms and PGI will complete the application paperwork for you. Sample brokerage firm application forms are identified below.
The obvious reason why someone would choose the brokerage option over a bank is this account will still provide you checkbook/wire control over your Solo-K assets, but also the ability, if you wanted, to purchase "traditional" assets from the firm. The use of a brokerage firm can be popular for those individuals who want one account where they can invest both traditionally and non-traditionally. Also, many people, when between non-traditional investments, want to have options on keeping the money "active" vs. keeping the funds in a money market savings account at a bank or credit union.
Option #3 -- Bank/Credit Union and Brokerage Account
You can have the plan's account opened at multiple (usually two (2)) institutions. Remember, you are not opening up two Solo-Ks, rather than Solo-K is simply opening up two accounts at financial institutions. Of course, each account is opened and under the title and EIN of the Solo-K.
Obviously, the purpose of the Solo-K will be to make contributions and grow your retirement account in a Pre-Tax or Roth manner. You can also make rollover contributions or, more simply stated, rollover funds from other eligible plans (e.g., non-Roth IRA, old 401(k)).
PGI can assist you in facilitating the rollover of the funds into the plan and the proper reporting of the rollover on your 1040 tax return for the year in which the rollover occurred.
Charles Schwab permits the establishment of a self-administered Solo-K through its CRA account application. A Master Account (through Schwab's CRA Master Account Application) is established for the plan. Additionally, a Solo-K account participant may also establish Participant Accounts for the different contributions being made to the plan for the participant.
To assist you, PGI will prepare your Schwab applications for what you need/desire for your Solo-K Plan.
Fidelity Investments also permits the establishment of a Solo-K plan through its Non-Prototype 401(k) Application. Slightly different from Schwab, there is one Fidelity application that can be used for multiple accounts held by the Solo-K.
To assist you, PGI will prepare your Fidelity applications for what you need/desire for your Solo-K Plan.
TD Ameritrade is another national brokerage firm that permits the establishment of a Solo-K through its Trust Account Application.
To assist you, PGI will prepare your TD Ameritrade applications for what you need/desire for your Solo-K Plan.
E*Trade wraps up the brokerage firms work through for establishing your Solo-K account. We are able to establish the account through E-Trade's Investment Only (Non-Custodian Retirement Plan Application . Similar to Fidelity and TD Ameritrade, the Trustee can use one form to open any contributory account desired.
To assist you, PGI will prepare your E*Trade applications for what you need/desire for your Solo-K Plan.
Keeping in mind that not all brokerage firms will "host" your Solo-K, the same is true with banks/credit unions. You can open your Solo-K account at any bank/credit union which will permit you to.
When opening the account at any bank/credit union, the account is typically established as a business checking account.
While PGI cannot open a bank account for you, we will provide you specific instructions on how best to open the account at a bank/credit union. This has also included calling banks/credit unions on behalf and in conjunction with the client to assist them if needed.
This is not a right or wrong answer. There are definite pros and cons to establishing your Solo-K account at a brokerage firm or bank/credit union.
The most important consideration in determining where you open the account is what are your short and long-term objectives with the account, and which options best suits those objectives.
While many self-directed promoters will push the path of least resistance by suggesting you open the account at your local bank/credit union, take some time to determine whether a bank/credit union or a brokerage firm best suits your needs/desires.
Consider whether you want the option to have access to "traditional" investments (e.g., mutual funds). You have this option with a brokerage firm account. You will be limited to CD's and Money Market Savings with a bank.
Advantage -- Brokerage firm. If the plan wants the option to invest in both Traditional (e.g, mutual funds) and Non-Traditional assets (e.g., real estate), there is no other option to pursue that the brokerage account.
Let's face it, some people wait until the last second to open their Solo-K and then have an upcoming, impending investment. In short, they may need their plan funds for investments very soon and time is of the essence. Whether one is establishing the account at a bank or brokerage firm, it can take up to 2 - 3 weeks for the account to fund with rollover funds. However, there are two important considerations for people who are time conscious:
1) If time is of the essence, one may want to open the account at their local bank or credit union as the account can be established and funded fairly quickly. Even though establishing an account with a brokerage firm can be established somewhat quickly, it is not as quick as driving to your local bank.
2) Due to Federal laws to crack down on drugs and terrorism, when the funds are moved to the brokerage firms, most firms have "hold" times of 5 business days. Typically, banks will clear these funds in a shorter time frame. If time is of critical essence, one may want to consider opening the Solo-K first, even if they later move the funds to an account for the plan at a brokerage firm.
Advantage -- Banks would hold the slight advantage here.
Many Trustees will make investments where the returns are sent from the investment sponsor to the plan via ACH (Automated Clearing House). While brokerage firms can accept funds via ACH, it never seems to be an easy proposition. Banks deal with ACH transactions daily, and it always seems to much easier to utilize a bank for ACH transactions than a brokerage firm.
Advantage -- Generally speaking, the bank holds an advantage here.
Some people create their Solo-K plan with the intent of investing in bank-held properties at auction. For anyone who has ever attended a real estate auction (e.g., county steps) knows they must present verification of investment funds by presenting a cashier's check. Bottom line: brokerage firms do not issue cashier's checks and banks do it daily.
Advantage -- Definitely a bank.
Depending on your relationship with your bank, account balance, etc. you may incur a monthly bank service fee for your plan's account. Typically, with most people possibly having multiple accounts with the bank and a sizeable amount of funds in their Solo-K account, the bank may not charge a monthly fee.
However, more probable is the situation where you rollover an amount (e.g., $100,000) into your Solo-K plan immediately invest the funds (e.g., $99,750) into a non-traditional investment. Hypothetically, only having an account balance of $250.00, the bank may now charge you a monthly fee. And, all fees must be born by the plan, not you personally.
In contrast, the Solo-K accounts PGI helps establish with our participating brokerage firms have no monthly service fees...period. Further, while you can choose to invest in traditional assets (e.g., ETFs, mutual funds) the brokerage firm offers, you are not required to do so.
Advantage -- Potentially the brokerage firm.
As you can see, it is a personal preference on where you "house" your Solo-K account. We typically see about 70% of our clients using a brokerage firm, with the other 30% utilizing the services of a bank or credit union.
Finally, it is permissible to have funds at both a bank/credit union and brokerage firm! This is a strong consideration for many. Keep in mind you are not establishing two Solo-K plans, rather using plan funds to open 2 (or more) accounts for the Solo-K.
While you receive your IRS-approved plan documents upon the plan's creation, plan requirements change over time. As needed, PGI will provide you with any required plan document changes, including the re-statement of the plan documents as required by the IRS.
Once your plan has been established, you will have questions related to the documents, process and investments from time to time.
Feel free to call PGI!
This would include the DC Plan Document, the Adoption Agreement, Trust Agreement and PPA amendment. These documents are critical in the manner in which the plan is established and operated.
You will need the Loan Policy, Loan Application and Loan Promissory Note.
You also may need or want the Plan's Summary Plan Description, Deferral Agreement, and Beneficiary Designation Forms.
With your plan creation, you will need an EIN for the plan and an IRS Satisfactory Opinion Letter confirming the plan documents have been approved by the IRS
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