Do I need an EIN for my Solo 401(k)?

The Solo 401(k) plan, also known as an Individual 401(k) plan, has quickly become the most popular retirement plan for the self-employed or small business owner with no full-time employees. One may wonder if you need an EIN for your Solo 401(k) plan.

An Overview of the Solo 401(k)

Not all Solo 401(k) plans are the same! A business can acquire a Solo 401(k) plan from a bank or traditional financial institution. However, the plan will likely not include many of the most popular plan options, such as Roth contributions, a loan feature, and the ability to make alternative asset investments, such as real estate.

However, companies, such as IRA Financial, will help you establish a Self-Directed Solo 401(k) plan that include all IRS-permitted options, including a Roth sub-account, if interested, the ability to borrow up to $50,000 tax-free, and the option of investing in traditional, as well as alternative, asset investments on your own as trustee of the plan.

Solo 401(k) Plan EIN

An Employer Identification Number (EIN) is also referred to as a Federal Tax Identification Number, or FIN. The EIN is generally used to identify a business entity or trust, such as a retirement plan. In general, an EIN will be acquired on behalf of the plan. The EIN is used to allow the plan to open a bank account.

There is no formal requirement that an EIN be acquired for a Solo 401(k) plan since it is an owner-only plan. Many plan sponsors will use the plan participant’s social security number or business EIN as the plan tax identification number.

However, any Solo 401(k) plan that wants to establish a bank account will likely need an EIN for the plan.  With IRA Financial, we can establish the plan’s bank account via Capital One without an EIN, however, if you wish to use your own bank, you will need to have IRA Financial acquire an EIN for you.

Does the Solo 401(k) Plan Trust Need an EIN?

A 401(k) plan is a trust, and under Internal Revenue Code Section 401, plan assets must be held in trust. There is no IRS or Department of Labor requirement that a separate trust be created in connection with the establishment of the plan. As a result, a separate trust is often not established as per the plan documents.

This is the reason why, in such a case, no separate trust agreement is required to be included in the plan documents, and it is also why a separate EIN is not required to be acquired for the plan trust. Typically, an EIN would only be acquired for the plan itself. Most Solo 401(k) plans will acquire an EIN for the plan for purposes of opening a bank or brokerage account.

Related: Popular Investments in a Solo 401(k)

Process for Acquiring a Solo 401(k) Plan EIN

For purposes of this article, let’s assume that Mike and his business ABC LLC establish a Solo 401(k) plan with IRA Financial. He requests IRA Financial to acquire an EIN for the plan so he can open a plan bank account. An EIN can be acquired by completing an online questionnaire at the IRS website or by completing and sending in IRS Form SS-4 to an IRS representative. When securing an EIN for a Solo 401(k) plan, the IRS will require the following information:

The IRS website will then provide the EIN# that can be used to open a bank account.  Typically, the bank will require a copy of the plan adoption agreement, basic plan document, and EIN to open a plan bank account.

Why Work with IRA Financial?

It is important to work with a company that has the tax expertise to help establish an IRS-approved Solo 401(k) plan. Here are a few items that we feel sets IRA Financial apart from other providers:

• We literally wrote the book on the Self-Directed Solo 401(k) plan
• Get started in minutes with our industry leading app!
• Customized plan design based on your retirement & investment goals
• Never step foot in a bank—we open your self-directed bank account for you at Capital One
• We handle all IRS reporting and offer annual IRS compliance services
• Checkbook Control
• No Transaction fees
• No minimum balance fees
• No account valuation fees
• No wire fees
• Invest in alternative assets
• Dedicated one-on-one support from a 401(k) plan specialist

You will be assigned a dedicated self-directed retirement tax specialist that will assist you in setting up your IRS-compliant Solo 401(k) plan.  Your specialist will finalize your plan documents as well as acquire the plan EIN.

Conclusion

In general, one is not required to acquire an EIN for his or her Solo 401(k) plan.  However, most plans will acquire an EIN from the IRS for purposes of opening a bank account or establishing a plan brokerage firm.

Feel free to reach out to us if you have any questions about the Solo 401(k) plan and when you need to acquire an EIN for your plan.