Solo 401 k Rollover and Outstanding Loan
It is possible to have both an employer-sponsored 401k and a self directed Solo 401k at the same time. Many plan owners would like to perform a Solo 401 k rollover to move funds from their existing retirement plans to their newly created plan. The Solo 401 k rollover can be possible for current 401k account, provided that the 401k plan offers in-service distribution.
Some plan owners also asked, what if the existing 401k has an outstanding loan? Is it possible to transfer the account balance and the loan to the new Solo 401k for self employed? Sense Financial answers this question in the latest Solo 401k Quick Tip video:
Solo 401 k Rollover and Outstanding Loan
Let’s say you have an employer-401k with an outstanding loan. Now you want to rollover the funds from this 401k to your new Solo401k. While the fund is eligible to be rolled over, the loan is typically not. This means in order to transfer the funds, you will need to pay off the loan in full. Otherwise, it will be considered a distribution and you will be taxed and penalized on the outstanding amount. It is recommended for people with outstanding loans against their 401k to discuss the proper process with their plan administrator before transferring the account.