Personal Finance (Not Investing) • How can I close my Solo 401(k)?

Thank you for all the responses.
In addition to the responses, I found a Vanguard checklist of how to terminate your Individual 401K plan.

https://personal1.vanguard.com/pdf/s550.pdf

So I’d like to put everything together and write a procedure, that the experts here can chime in on. This will be a dry run for me, and hopefully helpful for others in the future.

Procedure:

1. Amend my plan with a letter indicating that my plan is being terminated on a certain date. I keep this in my records.
2. Notify myself (the participant) in writing that the plan is being terminated. (I guess I keep this in my records too.)
3. Call up Vanguard on the phone and tell them the following:
   
   1. I wish to terminate my Solo 401K plan
   2. I want to rollover the assets in my plan (in kind) to:
      
      1. a Vanguard Rollover IRA for my Employer (tax deferred) contributions
      2. a Vanguard Rollover Roth IRA for my Employee (post tax) contributions
         
         * NOTE: I read some other threads that strongly recommend rolling over into separate accounts and avoid commingling with other pre-existing IRAs. I don’t fully understand the reasons for this, but it sounds like there are good reasons and once commingled, you can’t un-commingle. So better safe than sorry?
   3. Make sure Vanguard will file the needed 1099-R(s) (is it just one, or multiple?) on my behalf so I don’t have to file them myself.
   4. Validate with Vanguard everything sounds correct, and nothing here should trigger any taxable events.
4. After Vanguard completes the transfer of assets and termination (Vanguard told me it might take about 2 days), file the final Form-5500EZ:
   1. I will be using EFAST to file it. (I just filed my annual Form 5500-EZ for 2023 last week, so I know my account access works.)
   2. I have up-to 7 months to file this final form, but I will file this as soon as I can. Regardless, the 2024 Form will not be ready within my time window, so it is okay to use the 2023 Form 5500-EZ.
   3. My Form 5500-EZ will have the following differences compared to my prior filings:
      
      1. For “For the calendar plan year 2023 or fiscal plan year beginning (MM/DD/YYYY)”, I will put 01/01/2024
      2. And for ending, I will put the date where Vanguard has finished moving my assets and I have $0 left in the plan, e.g. 04/26/2024
      3. In Part 1A: Make sure to check “(3) the final return filed for the plan”
      4. Also in Part1A: Do I also need to check “(4) a short plan year return (less than 12 months)”? (Seems like I should check it.)
      5. Part2 5b(1): “Total number of participants at the end of the plan year” becomes 0.
      6. Part2 5b(2) “Total number of active participants at the end of the plan year” becomes 0.
      7. Part3 6a: "Total End of the Year Plan Assets" will now be 0.
      8. Part3 6c: "Net Plan Assets" will now consequently be 0.
5. The End

Thank you. I really appreciate everybody's feedback in this forum.

Statistics: Posted by chaser — Fri Apr 19, 2024 1:42 am — Replies 22 — Views 978

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