Which CamaPlan is Right for You?
The chart below compares the various CamaPlan types available. Click each plan name for more information.
| Roth IRA | Traditional IRA | SEP IRA | SIMPLE IRA | Individual K | ESA | HSA | |
|---|---|---|---|---|---|---|---|
| Type | Individual | Individual | Business | Business | Business | Individual (1) | Individual/Family |
| Tax Deductible |  |  | | | * | | |
| Qualified Tax Free Distribution | | | | | Both | | (2) |
| Contribution Limits (3) | Low | Low | High | Medium | High | Low | Low |
| Early Withdrawal Penalties | None | 10% +tax | 10% +tax | 10% +tax | 10% +tax | 10% +tax | 20% +tax |
| No Income Limit Restrictions | (3) | | | | | | |
* Yes, for both business and individual
(1) Any beneficiary who is under age 18 or is a special needs beneficiary
(2) For medical expenses only…see publication 969
(3) See publication 590 for latest limits
401k IRA Comparison Summary
When is a 401(k) more appropriate for your retirement investing? Check out the comparison chart below to see which one is best for your unique needs.
| Features | Solo 401K | SDIRA | Additional Details |
|---|---|---|---|
| Creditor protection | | | In most instances protection is available and state laws should be reviewed |
| Tax free (Roth Account) available | | | Solo 401k has larger contributions and no income limitations. |
| Tax Deferred account available | | | |
| Check book control capability | | | The IRA needs to establish another entity such as an LLC or trust. Continuous funding for the IRA new entity (LLC/Trust/etc.) is potentially a prohibited transaction. |
| Custodian/or Administrator required per IRC 408 | | | IRA requires a custodian /trustee-401k business owner can be trustee. |
| Administrative fees | | | Solo 401k is usually more costly however there are measures where cost can be minimized with the business owner controlling the process directly. Basically a “Do Your Own” model. |
| Able to purchase alternative investments | | | Real estate, notes, precious metals, private placements, etc. |
| Invest in Life insurance | | | |
| Self Employment required | | | |
| Personal loan available | | | $50k or 50% of account balance whichever is less. |
| RMD for Pre Tax after 72 years of age | | | 401k could transfer to a Roth IRA and do away with the RMD. |
| Fair market value reporting to IRS | IRS form 5500 | IRS form 5498 | Form 5500 can be completed by the business owner, CPA, or third party plan administrator but it is the responsibility of the business owner. The 5498 form is done by the custodian. |
| Report distributions to IRS on form | 1099 R | 1099 R | Solo 401k will also use form 5500 |
| Federal tax withheld on distributions | | | IRA has the option to determine if any, what amount of tax to withhold; 401ks usually have mandatory 20% withheld. |
| Prohibited Transaction rules apply | | | Reference Section IRC 4975 |
| Unrelated Business Taxable Income rules apply | | | Reference IRS form 990T and Instructions |
| Unrelated Debt Financed Income** | | | UDFI does not apply in most cases with a 401k. However it will most likely be triggered with an IRA that borrows non-recourse funds. |
| Contribution limits | | | Solo 401k allows salary deferral and company profit sharing. IRAs have business and personal accounts with different limits for each type of IRA. See CamaPlan page for more details. |
| Tax on early Post tax contributions distribution | | | 401ks require earnings be to withdrawn with post tax contributions proportionately resulting in a taxable event. Roth IRA distribution rules allow for early withdrawal of contributions anytime without taxation. |
**Acquisition indebtedness for 401(k) plans, particularly in the context of avoiding Unrelated Business Taxable Income (UBTI) and Unrelated Debt-Financed Income (UDFI), hinges on several key requirements under the IRS Code. For a qualified organization such as a Solo 401(k) to use debt-financed real estate without triggering UBTI or UDFI, the following conditions must generally be met:
Firstly, the debt used to acquire the property must be nonrecourse, meaning the lender’s only recourse in the event of default is limited to the collateral itself and does not extend to the plan sponsor or participants. This ensures that the debt is not considered “acquisition indebtedness” under Code Section 514(c)(9), which specifically exempts such arrangements from UBTI treatment.
Secondly, the acquisition must adhere to strict guidelines: the property price must be fixed at the time of acquisition, payments on the debt must not be contingent on property income, and the property cannot be leased back to certain related parties like the seller or the employer of plan participants. Additionally, if the property is held through a partnership or LLC, all partners or members must be qualified organizations and have equal rights to income and deductions.
In essence, a Solo 401(k) can utilize nonrecourse financing to acquire real estate directly or through a pass-through entity like an LLC, as long as it complies with these regulations. This structure allows the plan to benefit from investment in real estate without incurring UBTI or UDFI liabilities, provided all statutory requirements are meticulously followed.
