Solo 401(k) Trustee

One of most enticing aspects of a self-directed Solo 401(k) is that the plan can be established without the requirement that a custodian hold assets of the plan.  As we know, IRS rules require that any IRA account be held by an IRS-approved custodian.  This requirement is not required or stipulated for a qualified plan (e.g., 401(k)).

Who then is responsible for the operation and administration of the 401(k) plan?  A Solo 401(k) Trustee is the responsible party for the plan.  This can be yourself or a designee of your choice.  In the case of an individual plan, the Solo 401(k) Trustee will also typically be the business owner and participant (you).  In this arrangement, the Solo 401(k) Trustee is the individual who has the legal authority to operate and be responsible for the plan.

Let’s break this down a bit more:

• In order to be identified as the Solo 401(k) Trustee, the plan documents for the plan will identify the Trustee and the duties and responsibilities of the Trustee;
• An individual or entity can serve as the Trustee.  In a Solo 401(k) plan, the individual Trustee is usually the business owner and participant;
• The Trustee is the legal authority for the plan, and is responsible for ensuring that plan not only operates in compliance with all IRS and DOL regulations, but also that the Trustee acts strictly on behalf of the plan with serious responsibilities for upholding fiduciary expectations for the plan;
• The Solo 401(k) Trustee is also responsible for maintaining all plan documents and keeping accurate records related to plan contributions, distributions, loans, rollovers and other aspects of the plan.

The Solo 401(k) Trustee has important responsibilities to the plan.  It is a responsibility that should be taken seriously.  Also, regardless of where the 401(k) account is “housed”, it is a self-directed plan.  What I mean by this is that it does not matter where the account is housed, the Trustee is responsible for the plan, not the financial institution where it may reside.

If you establish a Solo 401(k) plan, you will enjoy the opportunity to control how you invest your retirement funds.  However, keep in mind that as the Solo 401(k) Trustee, you have the responsibility (and the freedom) to operate the plan correctly.

As always, the information provided is intended to be educational in nature.  It is not intended, nor should it be interpreted as, any form of tax, legal, financial or investments advice.  You must always consult with your respective professional in all such matters.