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Opened solo 401k w/ E-trade... question

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  • Opened solo 401k w/ E-trade... question

    I have side income this year and just to keep things simple, did a standard non-self directed individual 401K through E-trade. The form i filled out had option for profit sharing and i certainly checked that.

    When I go to contribute, it is showing options of only contributing up to 19500 for the year 2020, although based on https://docs.zoho.com/sheet/publishe...05e8140934898a I am eligible to contribute around 34K.

    When I look further through E-trade's small business retirements accounts, it looks like a "Profit sharing plan" is perhaps actually what a I want? Can anyone confirm?

    Thanks,

  • #2
    I'm not familiar with E-trade's platform but i401k contributions are broken up into two potential parts - an employee contribution and employer contribution (both of which would be you). Everyone is limited to one employEE contribution of $19,500 (if under age 50), but the additional amount you are eligible to contribute comes from employer contributions, which there is some math required to determine the exact amount you can make. I'd just ask Etrade how to make employer contributions, if you're sure on the amount you can contribute, or maybe somewhere here can help with more specific guidance on how to logistically make those employer contributions.
    Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC | Podcast Host - The Physician's Guide to Financial Wellness

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    • #3
      Yes, thank you for reply. I'm aware of the difference b/w the employEE and employER contributions. I was just alarmed at E-trade's transfer screen, as when I input something greater than 19.5K, it would not allow the transfer. I was hoping someone here had used them before, as I don't want to potentially hose myself by contributing to a wrong account. And trying to contact them right now is extremely painful and takes forever waiting on hold.

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      • #4
        Ah, sorry, I wish I could be more help here! Some of these wait times for any provider are ridiculous right now.
        Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC | Podcast Host - The Physician's Guide to Financial Wellness

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        • #5
          I've been happy with my etrade accounts until this error popped up. I've spoken to them about this; basically, they updated the software to designate employer and employee contributions, but as you've noticed you can only deposit the employee portion. They're aware of the problem, working on it, but everything slower because of covid...

          There are workarounds. I wire the money into the account, and they designate it as employer contributions. I then call them, and they refund me the wire fee. They also say you can use the app to make a mobile check deposit into the account, but when I tried that I was scared off by the language saying the contribution would be "irrevocably characterized as a rollover contribution".

          I'll DM you the direct telephone number to their retirements division if you want.

          Good luck. It's frustrating. I've maxed out my contributions for the year, so I don't have to mess with it for awhile. But if it's still an issue next year, I'm opening a solo 401k somewhere else and rolling it over.
          Last edited by Differential; 09-17-2020, 07:06 PM.

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          • #6
            I had a similar experience to Differential. I don't remember what the specific workaround was, but basically I had to call a few times to get it sorted out.

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            • #7
              Originally posted by Differential View Post
              I've been happy with my etrade accounts until this error popped up. I've spoken to them about this; basically, they updated the software to designate employer and employee contributions, but as you've noticed you can only deposit the employee portion. They're aware of the problem, working on it, but everything slower because of covid...

              There are workarounds. I wire the money into the account, and they designate it as employer contributions. I then call them, and they refund me the wire fee. They also say you can use the app to make a mobile check deposit into the account, but when I tried that I was scared off by the language saying the contribution would be "irrevocably characterized as a rollover contribution".

              I'll DM you the direct telephone number to their retirements division if you want.

              Good luck. It's frustrating. I've maxed out my contributions for the year, so I don't have to mess with it for awhile. But if it's still an issue next year, I'm opening a solo 401k somewhere else and rolling it over.
              I used the mobile app to scan my check. Then I just called them to change it from Employee to Employer contribution. It’s mildly annoying but doable. Hopefully they fix the glitch soon, OP.

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              • #8
                Originally posted by Differential View Post
                I've been happy with my etrade accounts until this error popped up. I've spoken to them about this; basically, they updated the software to designate employer and employee contributions, but as you've noticed you can only deposit the employee portion. They're aware of the problem, working on it, but everything slower because of covid...

                There are workarounds. I wire the money into the account, and they designate it as employer contributions. I then call them, and they refund me the wire fee. They also say you can use the app to make a mobile check deposit into the account, but when I tried that I was scared off by the language saying the contribution would be "irrevocably characterized as a rollover contribution".

                I'll DM you the direct telephone number to their retirements division if you want.

                Good luck. It's frustrating. I've maxed out my contributions for the year, so I don't have to mess with it for awhile. But if it's still an issue next year, I'm opening a solo 401k somewhere else and rolling it over.
                I had a similar issue. I opened my solo 401k with ETrade so that I could do my 2019 EmployEE contribution to a Roth 401k since it was my transitional year from fellowship.

                I made my $19,500 contribution in February 2020 thinking it was my 2020 EmployEE contribution. I don’t recall if there was an option to select EmployEE or EmployER. That $19,500 showed up as an EmployER contribution. I was able to get ETrade to recharacterize it to EmployEE but was still unable to contribute anymore to the EmployER portion to hit $57,000 for 2020. The solution I came up was to connect my ETrade brokerage to my Ally checking, and transfer the final portion of my EmployER contribution in that manner.

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                • #9
                  Originally posted by endo4jc View Post

                  I had a similar issue. I opened my solo 401k with ETrade so that I could do my 2019 EmployEE contribution to a Roth 401k since it was my transitional year from fellowship.

                  I made my $19,500 contribution in February 2020 thinking it was my 2020 EmployEE contribution. I don’t recall if there was an option to select EmployEE or EmployER. That $19,500 showed up as an EmployER contribution. I was able to get ETrade to recharacterize it to EmployEE but was still unable to contribute anymore to the EmployER portion to hit $57,000 for 2020. The solution I came up was to connect my ETrade brokerage to my Ally checking, and transfer the final portion of my EmployER contribution in that manner.
                  I don't recall there being an option either. I had to call in each time and have the contributions reclassified.

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                  • #10
                    No worrisome tax implications for them to "reclassify" it as EmployER contribution? Also, it appears to only allow me to contribute the expected 19.5K... but I have more than that to contribute (as empolyER)? Will this be an issue?

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                    • #11
                      Originally posted by IRdoc View Post
                      No worrisome tax implications for them to "reclassify" it as EmployER contribution? Also, it appears to only allow me to contribute the expected 19.5K... but I have more than that to contribute (as empolyER)? Will this be an issue?
                      Regarding tax implications, I do not see there being any issue, but I'll find out next year after my returns are done. I contributed the full $57k to I don't know why it would not allow you to only contribute $19.5k.

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                      • #12
                        After another 1.5 hour hold session with E-Trade this am, they claim the online contribution selector will be updated this Friday Oct 9. Holding breath.

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                        • #13
                          Originally posted by IRdoc View Post
                          After another 1.5 hour hold session with E-Trade this am, they claim the online contribution selector will be updated this Friday Oct 9. Holding breath.
                          Any update if the issue is fixed?
                          I had been planning to open an etrade solo 401k account for mostly employer profit sharing contributions but was hesitating given the recent reports of issues.
                          Thanks

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                          • #14
                            Oh, mercy - thank you all for the insight!
                            Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                            • #15
                              Can confirm this issue is FIXED! Just contributed to mine this past week. It basically claims YOU are responsible for claiming employee vs employER contributions (which you should be, not them).

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