My spouse and I have separate solo 401k plans (let’s call them Plan A and Plan B), which we opened a few years ago when we undertook self-employed activities. This year, we opened an LLC as QJV and are looking to consolidate those solo 401k plans into one (let’s call it Plan C).
Furthermore, after some research, it seems that in community property states, we’re considered a Controlled Group and can only have one solo 401k plan. However, we have two solo 401k plans and need to fix this as soon as possible.
We are trying to understand the best course of action.
Option #1:
Adopt a new solo 401k plan (Plan C)
Perform trustee-trustee transfers from Plan A and B to the new Plan C
Close the old solo 401k plans (Plans A and B)
Option #2:
Amend (restate) Plan A so it becomes Plan C
Perform a trustee-trustee transfer from Plan B to the new Plan C
Close solo 401k plan (Plan B)
Option #3:
Create a controlled group plan, which will list both Plan A and Plan B in the solo 401(k) plan documents (Plan C).
It seems like Option #1 is the simplest one, but I’m unsure if it’s ok to do it. Option #2 acts as a middle ground, but its benefits compared to Option #1 aren’t very clear to me. Option #3 appears to be the most complex.
Can we go with Option #1 in our case?
