Posted about 3 years ago

Solo 401k Bank Account Tips | Self-Directed 401k Bank Account Guide

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The self-directed solo 401k provider that you opened your self-directed solo 401k with will generally have a contact at a major bank ( popular major banks include Bank of America and Wells Fargo bank). However, some business owners may instead choose to open the solo 401k bank account at their local bank or credit union.

Your local banker or credit union representative will need to be educated on the solo 401k bank account process because he or she will most likely overthink the process. Quite often the banker will assume that you are seeking to open a solo 401k with the bank, which obviously is not the case. Instead, you simply need to open a bank account for the solo 401k that you adopted through your solo 401k provider

Following are some tips to take into account when opening the bank account for your self-directed 401k.

Explain that a self-directed 401k falls under the Internal Revenue Code and point him or her to the following IRS website:https://irs.gov/retirement-plans/plan-sponsor/401k-resource-guide-plan-sponsors-starting-up-your-plan

Explain that a solo 401k falls under the retirement trust umbrella and that the business owner can serve as the trustee of the 401k trust. The following IRS web page confirms this. 

Explain that the business owner(s) as trustee(s) direct all investments and decide on the bank or credit union of where to hold the solo 401k trust liquid funds; therefore, the bank will not serve as the trustee of any of the alternative investments (e.g., real estate, precious metals, tax liens, notes, private shares, etc.) and will not administer or safe-keep the solo 401k participant loan documents. Instead, these are responsibilities reserved for the trustee—typically the business owner(s). Provide the following language to help the banker understand this which can be found in the IRS website by CLICKING HERE.

"Trusts and trustees. 401(k) plans are funded through a trust established to hold and invest the plan’s assets. At least one trustee is appointed to have responsibility for the activities of the trust and its assets. This is a serious responsibility with considerable potential for liability. Trustees might include the business owner, an employee, or a financial or trust institution."

Self-Directed 401k Trust Documents: Spoon-feed the banker with the various solo 401k trust documents so not to confuse him or her. First provide the Solo 401k Trust Agreement, which usually suffices as it lists the name of the plan, the name of the trustee(s) and their signatures; however, some banks will also require the Adoption Agreement and the Basic Plan Document.

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Common Questions Posed by the Banker When Opening Bank Account(s) for a Solo 401k Trust:

Question. How is account titled?

Answer: The bank account is tiled in the name of the solo 401k trust.

Question: Who is the trustee?

Answer: The business owner is the trustee.

Question: Who has signing authority?

Answer: The solo 401k trustee has signing authority.

Question: What banking features are allowed for the solo 401k trust bank account?

Answer: Check writing, debit cards, ACH, wires and cashier checks are permitted; however, credit cards and personal lines of credit are not.

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To learn more about the self-directed solo 401k process click on SOLO 401K FAQs.



Comments (11)

  1. Bank of America is also a good option. When we speak to the BOA banker they will open the bank account as they like to confirm a few items about the Trust with us. 


  2. Titan Bank, titanbank.com, has a formalized program for providing Self Directed 401(K) bank accounts as well as related LLCs that some Trusts also utilize.  All standard features such as wires, ACH, checks, etc are supported for these account. You are also able to get bank checks created for purchasing tax liens from taxing authorities.  Titan's contact number is 940-325-9821 and you can ask for the Self Directed Retirement Trust department.

    Full disclosure, I am with Titan Bank and providing this information since several posters seems to be looking for a solution that will support them.


  3. Wells Fargo is the only national big bank that I have found to be knowledgable.  I did all of my paperwork and opened the account online/fax.


    1. I am about to open accounts with Wells Fargo, but they have a $500 minimum balance to avoid monthly service fees on their business checking accounts.  My wife and I are both plan participants, with ROTH & traditional accounts, so 4x$500 means we need to strand $2,000 in these accounts to avoid fees...

      I'm going to call Titan tomorrow and see if they sound knowledgeable...


  4. I am having the same problem.  I first tried to set up my account with Bank of America.  It seemed to be over their head and they said they couldn't do it.  So I set it up with E*TRADE thinking I would be able to do ACH or debit card transactions.  Come to find out that is not the case. I can only write checks or wire money and if I wire money it is not immediate - I have to fill out a wire form, have it notarized, and mail the original wire form to E*TRADE before they will wire it. Might as well overnight a check to someone.  If I want to buy real estate foreclosures, go to auctions, tax lien investing, etc. I need a debit card or be able to do ACH transactions.  I haven't checked out Wells Fargo... are they the only traditional bank that knows what to do about this?  I want to move my funds out of E*TRADE to somewhere else.


    1. I'm in the same situation as @Nyla Hucks right now.  I've tried 3 different banks and so far the banks either have no idea on how to handle this or they just refuse to handle this because they don't know and understand this type of set up.  I want to find a bank where I can write checks or wire money when I need.


  5. Is Fidelity the 401k plan document provider? If not, then you can open a bank account at a local bank for the solo 401k and move funds between the brokerage and bank account. I know Fidelity also allows for wires which can be used instead of a cashiers check. 


  6. I'm having trouble finding a bank. My self directed 401k is with Fidelity. My goal is to invest in real estate but I can't do that through Fidelity. Even when my checkbook arrives (in a few days), I'm stuck because the title company wants a cashier's check. I'm trying to figure out if I should keep looking at more banks or move my 401k again.


  7. In addition to the bank account option, a brokerage account can be opened at the brokerage firms listed below with checkbook control for placing alternative investments such as real estate, precious metals, promissory notes, tax liens, to process solo 401k participant loan, and to invest in stocks, mutual funds, futures, options, and on margin.

    Fidelity

    Schwab

    E-Trade

    TD Ameritrade

    Solo 401k bank account vs solo 401k brokerage account


    1. So someone who has a solo 401k with checkbook control can invest in stocks on margin?  


      1. Yes a solo 401k can utilize margin when investing in equities; however, this may trigger UBIT if borrowed funds are actually used. Bartels Trust v. U.S. (106 AFTR 2d 2010-6004 9/07/2010)