Fidelity Solo 401k
I opened a Solo 401k at Fidelity last year. However, I held off on making our contribution until just this month, so that we would be able to more accurately pinpoint our income.
This is one of the best characteristics of the solo 401k. As long as you establish your plan in the prior calendar year, you don’t need to make your contributions until your tax filing date, including extensions.
Fidelity Rejected My Contributions
Unfortunately, Fidelity sucks. I just sent in our contributions, and they were rejected. Apparently they closed my account, because my name didn’t match their records. I got married six years ago, but I have a different account there that was opened before that.
So let me get this straight, their computer system can’t handle opening a new account for someone who got married and uses their married name? Give me a break. I must be the only person to have ever gotten married and change their name, right?
Fidelity Service Impacts Our Tax Bill
And this is much worse than when Scottrade tried to make me pay fees to change my name! Because they closed my account last year (and did not notify me), I can no longer make my solo 401k contribution for last year.
Since my extension was filed with an assumed solo 401k contribution, I’d be on the hook for additional taxes, including penalties and interest. I spoke with a supervisor about the situation, and he apologized. However, that apology doesn’t pay the tax bill! Thanks Fidelity, you suck!
After spending hours brainstorming, I came up with a back up plan to divert my contribution to my husband since Public Employees can Double-dip on Retirement. Thank goodness we live in a community property state too, otherwise I wouldn’t be able to just switch it like that without other repercussions! Although I’m not happy about it, at least we avoided a large tax bill full of penalties and interest.
Fidelity Loses Our Business
I had planned to move a significant amount of money to Fidelity, using my solo 401k to execute a Roth IRA Conversion Strategy to Avoid Taxes. Looks like they’ll miss out on my business.
Instead, as soon as they cash the check for my husband’s contribution, I’ll be moving my account to a Vanguard solo 401k (which wasn’t available when I opened my solo 401k).
I’m sure it won’t matter to them that I’m moving my account. However, I’m a firm believer in taking your business elsewhere to demonstrate unacceptable service. They made a mistake they couldn’t fix. I assured them I’d tell everyone I knew, which is all of you!
Taxes are complicated, so it’s very important to have a service provider you can trust. Unfortunately, Fidelity wasn’t reliable enough. Vanguard, my paperwork will be in the mail shortly!
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Madison, you ROCK!
I’m sure they will regret this decision.
September 24th, 2009 at 10:06 am
that is why I never changed my name. (well, really I never changed my name because it’s an antiquaited tradition based on men’s ownership of women, but ease is a nice byproduct that validates my choice of authenticity and simplicity)
September 24th, 2009 at 10:07 am
I called Fidelity yesterday. I wanted to transfer money in 2 IRA accounts that were in cash money market reserves to a local bank. The Fidelity Rep. fell back on the technical regulation that only 1 distribution can be made a year from a retirement account. Since I am in my 40’s this is not a distribution, but a roll over. I explained to them that my CPA shows that on the front page of my 1040. My objective was to move the money market reserve funds since the $1 is no longer guaranteed. Yet, they would only cut me a check for distribution from one account.
September 24th, 2009 at 10:17 am
@ Libby: I sure hope so!
@ Beth: If only I could have been able to see into the future what a pain it would be! …ok, well I would have still changed it…
September 24th, 2009 at 10:21 am
@ Lee: What? Seriously? That’s even more of a problem than what happened to me. You get 60 days to complete a rollover, and really, it’s not their responsibility to track the rollover, it’s yours.
I even went through their 123 pages of IRA disclosures to see if they had some weird provision, but I couldn’t find any.
Ok, Fidelity, strike two!
September 24th, 2009 at 10:32 am
I think any articles related to Roll Over IRA would be helpful
Also if there are any options to take loan against Rollover IRA woudl be really helpful
I am lookign borrow from my retirment accoutns for down payment for buyign the house
September 24th, 2009 at 2:53 pm
@Beth: wow you’ve really thought about that a lot, for my wife she was EXCITED to GET to take my name so to each their own.
@Lee: always do direct rollovers to avoid this problem.
Madison, don’t put the blame solely on Fidelity. In some small part, it’s mostly their problem, it’s your problem too for not updating your name information with EVERYONE you have or have had an account with after you changed it.
September 25th, 2009 at 9:06 am
@ PK: I agree, if I would have updated my name on everything, I could have avoided this.
However, that’s much easier than it sounds…
I actually tried to update my name with Fidelity in the past. But they keep changing my accounts back to my maiden name, insisting that their records are correct. I spent 20 minutes on the phone and they still couldn’t get it right.
There’s a certain level of customer service that I expect. Spending a ridiculous amount of time, or paying fees to change my name is where I draw the line.
It’s funny because I was able to change my name on my credit cards with one quick call!
September 25th, 2009 at 9:25 am
PK: Some institutions do not provide for a direct rollover. Therefore, to move the IRA to those institutions a distribution is necessary to rollover the funds.
September 25th, 2009 at 9:58 am
ON THE SUBJECT OF FIDELITY: Today I received an Account Profile Confirmation form from Fidelity in the mail dated Sept. 11th. The cover letter that is included states that the SEC requires them to verify the personal and financial information of each Broker and Mutual Fund account owner on a periodic basis. I also use TD AMERITRADE and never received this form from them. Does Fidelity simply use the SEC regs. to qualify their customers? For those that use Vanguard and other MFCs please let me know your experience.
September 25th, 2009 at 10:11 am
TO MADISON: Have you considered still opening up a SEP? That is what I do for my husband’s company with Fidelity. I am surprised that Fidelity did not suggest a SEP since the extension date has not passed.
September 25th, 2009 at 10:45 am
@ Lee: Brilliant idea! Why didn’t I think of that? The due date for the establishment and the contributions is the extension date, so we’d be ok. Let me think about this one…
September 25th, 2009 at 10:58 am
MDP: Really not that brilliant, just a familiar retirement plan for me since we use it. You are really the brilliant one to have this blog that allows for shared experiences! Your blog posted with content are brilliant too. The content provided added value since it is not a cut and paste of other financial articles. Keep it up. Being real helps others!!!!!
September 25th, 2009 at 11:12 am
I was going to mention the SEP IRA as well, as you can contribute up to the filing deadline (extensions included). The only difference is that you can’t contribute as much to a SEP as you can with a Solo 401k. But it should be enough to help lower your taxes. But if you go that route, I would still recommend opening it at Vanguard.
By the way, I still haven’t made my full Solo 401k contribution either – I was waiting until I had my taxes finalized, which should be next week. I opened my account at Vanguard, primarily because I already had some taxable accounts with them. But this makes me glad I went that route.
September 26th, 2009 at 12:35 pm
Ahh… the dreaded name change.
Besides the system being inadequate, I still don’t understand this silly tradition. Most other parts of the world don’t bother with this so why are we?
Mike
September 26th, 2009 at 2:08 pm
Sounds like their was a misunderstanding and you’re just bitter. I have used Fidelity for 10 years and they are awesome. But if I was able to, I’d go Vanguard.
September 26th, 2009 at 3:01 pm
@ Patrick: The SEP was a great idea. However, the more I think about it, it might not work out so well.
Because we’ve been planning to use the 2010 Roth conversion strategy next year, it might create more trouble for us. The SEP IRA money counts in the basis for the pro rata calculation.
@ Michael: I guess that’s why traditions are traditions…
@ Steve: I too loved Fidelity as we’ve happily used them for a long time (in addition to Vanguard).
And you’re right, it may have been a misunderstanding to figure out which name should have been on the account.
However, closing the account all together without notifying me, was indeed their mistake. The supervisor (who was very nice) did admit they screwed up and tried to fix it for me. Unfortunately, you can’t go back in time to retroactively open the account.
September 26th, 2009 at 3:59 pm
I have been with Vanguard for 7 years, this past month was a disaster, a simple change to the contribution date and everything was FUBAR. Pointing the finger at the companies while it may be satisfying, I think misses the point. The IRS regulations they must comply with are extraordinary, and I believe these are the root cause of the problems. I almost switched to Fidelity, then I looked at the paperwork involved and saw many more potential problems with transferring my accounts (401k & 529), so I left them in place.
October 9th, 2009 at 11:57 am