The loan feature is one of the benefits to a client who holds a Solo K account. The decision to take a loan from the Solo K account is solely the discretion of the account owner. Third Parties do not have any right to enforce the Solo K owner to take a loan. The account owner alone makes the decision.
If a loan is taken from the Solo K account, the IRS requires the borrower to adhere to the
Amortization Schedule which will be supplied in the loan paperwork. If there is a failure to make regular “timely and equal” payments to the loan the IRS requires the borrower to show the loan as a distribution and file a 1099 with their tax advisor.
Here are some strategies that individuals do to make their Solo 401(k) payments:
They set up the loan payment as a Bill Pay with their bank so the payment goes out monthly or quarterly.
If individuals choose to mail a check or wire the funds monthly or quarterly, a reminder set on their calendar notifies them to send the payment.
Often times an amortization schedule is kept handy and in view.
Things to remember...
Quest Education wants to educate all Solo K owners on the benefits and the processes of the loan feature. Quest Education cannot benefit from the proceeds of the loan and can only help facilitate processing of the loan.
Quest Education is not responsible for keeping track of payments. It is the sole responsibility of the account owner to keep track of payments. Account summaries of your loan payments can be found on your custodial statements.