What happened to Vanguard's Solo 401(k)?

On April 16, 2024, Ascensus announced the acquisition of Vanguard's Individual 401(k) plans business, along with multi-SEP and SIMPLE IRA plans. Existing Vanguard Solo 401(k) accounts were defaulted to Ascensus without active participant choice in most cases. Customer complaints since the transition cluster around higher fees, limited investment options, poor app/website experience, and slower administrative response. The Kaplan Law Firm is investigating possible fiduciary duty violations connected with the transfer. Ascensus carries a BBB D- rating. Vanguard customers who don't want to stay with Ascensus can roll over to another Solo 401(k) provider — Fidelity and Schwab are the most common destinations.

Should I leave Ascensus for Fidelity?

If your Solo 401(k) is straightforward (single income source, no Mega Backdoor Roth strategy, no need for after-tax contributions), Fidelity is the cleanest exit from Ascensus. The mechanics: open a Fidelity Self-Employed 401(k), initiate a direct rollover from Ascensus to Fidelity (avoids tax withholding), close the Ascensus account once funds clear. The rollover takes 2-4 weeks typically. Fidelity charges $0 setup, $0 annual maintenance, $0 trade commissions on stocks/ETFs. The trade-off: Fidelity, like Schwab and the former Vanguard, doesn't natively support Mega Backdoor Roth on its off-the-shelf plan. If you wanted that strategy, you need specialized plan documents from a provider like My Solo 401k Financial.

Can I do Mega Backdoor Roth at Fidelity?

Not with Fidelity's standard off-the-shelf Solo 401(k) plan. The mysolo401k.net guidance is direct: 'You cannot use basic off-the-shelf solo 401(k) plans from providers like Fidelity, Schwab, or Vanguard for Mega Backdoor Roth strategies.' To execute Mega Backdoor Roth (after-tax contributions converted to Roth, allowing up to $72,000+ Roth contribution annually for high-income solo earners), you need a Solo 401(k) plan with documents that explicitly authorize after-tax contributions and in-plan Roth conversions. The standard structure: establish a Solo 401(k) plan through a specialized provider (My Solo 401k Financial, Carry, or similar) for $500-$1,500 in setup fees, with the investment custody at Fidelity or Schwab. The plan documents come from the specialized provider; the money sits at the brokerage.

Is Schwab Solo 401(k) actually free?

Yes — $0 setup, $0 annual fees, $0 commissions on stock/ETF trades. The structural cost is zero. The functional limitations: Schwab's Individual 401(k) holds ETFs but historically excludes Vanguard mutual funds from the platform (you can hold Vanguard ETFs, but not Vanguard mutual fund share classes). For most investors this is irrelevant — Vanguard ETFs deliver functionally identical exposure at similar expense ratios. For investors specifically wanting Vanguard institutional mutual fund tax efficiency, Fidelity is the better choice (Fidelity holds both Vanguard ETFs and Vanguard mutual funds in retirement accounts). Schwab's plan is the cleanest free option for index-ETF-focused investors.

What is Form 5500-EZ and do I need to file it?

Form 5500-EZ is the IRS annual return for one-participant retirement plans, required when your Solo 401(k) balance crosses $250,000 at year-end. The form reports plan assets and basic information; it doesn't trigger tax (Solo 401(k) is tax-advantaged) but is mandatory once the threshold is crossed. The penalty for late filing can reach $250 per day, capped at over $150,000 per year. The catch: Fidelity, Schwab, and most off-the-shelf Solo 401(k) providers do NOT file Form 5500-EZ for you. You're responsible. Many Solo 401(k) holders don't realize this until they cross $250,000 and find out at year-end. Specialized providers like My Solo 401k Financial typically include 5500-EZ filing in their setup fee. The off-the-shelf providers leave it to you.

Can I have a Solo 401(k) and a regular 401(k) at the same time?

Yes, but contribution limits apply across both. The employee deferral limit ($24,500 in 2026, $32,500 with 50+ catch-up) is a single per-person limit across all 401(k) plans you contribute to in a year. So if you contribute $20,000 to your day-job 401(k), you can only contribute $4,500 in employee deferrals to your Solo 401(k). The employer (profit-sharing) portion of the Solo 401(k) is separate and not affected by your day-job 401(k) employer contributions — that's how high-income freelancers with day jobs can still hit the $72,000 total annual limit through Solo 401(k) employer contributions on their freelance income.

Solo 401(k) Providers 2026: After Vanguard Exited the Business

Disclosure: Some links in this article are affiliate links. If you sign up through them, I may earn a commission at no extra cost to you. I only recommend tools I use or have thoroughly evaluated. Full disclaimer.

Vanguard exited the Solo 401(k) business on April 16, 2024. The announcement, captured by My Solo 401k Financial: "Vanguard Exits Individual 401k Business and Sells to Ascensus." Existing Vanguard Solo 401(k) customers were defaulted to Ascensus — a third-party retirement plan administrator — without most participants being asked. The transition has produced higher fees, worse service, and an active class-action investigation. The Kaplan Law Firm is investigating "whether Ascensus, LLC violated its fiduciary duties to its accountholders in connection with its handling of solo 401(k) accounts that it purchased from the Vanguard Group."

The 2026 Solo 401(k) market is structured around that exit. Most freelancer-targeting articles still recommend Vanguard out of habit; that recommendation has been outdated for a year. The honest 2026 question isn't "who's the best Solo 401(k) provider?" It's two questions: (a) where should the displaced Vanguard customers land, and (b) what should new 2026 buyers know about Mega Backdoor Roth — a strategy that the off-the-shelf providers (Fidelity, Schwab, even the former Vanguard) don't natively support, despite being the highest-impact retirement move available to high-earning freelancers?

This article walks the four most relevant providers (Fidelity, Schwab, E*TRADE, the specialized-plan-document path) and answers both questions. I'm not a financial advisor. I'm a freelancer with a Solo 401(k) at Fidelity and enough familiarity with the Mega Backdoor Roth structure to know I haven't set it up yet — and the framework below explains both decisions.

What Happened With Vanguard → Ascensus

April 16, 2024 marked the announcement. Ascensus had agreed to acquire Vanguard's Individual 401(k) plans business, along with Vanguard's multi-SEP and SIMPLE IRA plans. The transition for existing Vanguard Solo 401(k) holders was structured as a default — accounts moved to Ascensus unless the participant actively initiated a rollover elsewhere within a window that wasn't always communicated clearly.

The customer experience post-transition has been documented across Bogleheads, the White Coat Investor forum, and other small-business retirement communities. The dominant complaint pattern: higher annual fees than Vanguard charged. Vanguard had charged $20 per year per fund held (waived if any participant in the plan had at least $50,000 in qualifying Vanguard assets). Ascensus's fee structure is documented as higher with less clear waiver paths. A Bogleheads forum thread titled "Ascensus lawsuits, BBB D- rating, poor reviews, fees and private equity" captured the sentiment of customers who hadn't asked for the change and got a worse deal.

The Kaplan Law Firm's investigation page is direct about the legal posture: "Many of these new Ascensus customers have expressed significant concerns with how their accounts have been handled by Ascensus." The investigation is examining potential fiduciary duty violations in the transfer process, with a possible class-action filing. As of mid-2026, no class action has been certified, but the investigation remains active.

For Vanguard customers transferred to Ascensus, the practical decision is whether to stay or to roll out. The math:

Staying with Ascensus. Lower friction. Higher fees. Worse app and website per customer reports. Active legal uncertainty. For a small-balance Solo 401(k) (under $50,000) where the fee difference is modest in absolute dollars, staying may be acceptable while you watch the situation develop.

Rolling to Fidelity or Schwab. Direct trustee-to-trustee rollover (no tax withholding, no penalty). Process takes 2-4 weeks typically. Fidelity charges $0 setup and $0 annual; Schwab charges $0 setup and $0 annual. Both have better app/website experience than Ascensus per customer reviews. The migration is one annoying afternoon of paperwork that pays back over decades of holding the account.

For balances above $50,000, the rollover almost certainly nets out positive given the fee difference and quality difference. For balances under $50,000, the math is closer but still favors rolling out unless you have specific reasons to stay.

Fidelity Solo 401(k): The Default Winner (With Caveats)

Fidelity's Self-Employed 401(k) is the most popular Solo 401(k) destination post-Vanguard for clear reasons:

Cost. $0 setup, $0 annual fees, $0 trade commissions on stocks and ETFs. Mutual fund trades are free for Fidelity-family funds and $49.95 for non-Fidelity transaction-fee funds (most index investors will use Fidelity ZERO funds or no-fee Vanguard mutual funds, both available at $0).

Fund universe. Fidelity's Solo 401(k) holds Fidelity mutual funds, Vanguard mutual funds (with one-time $49.95 transaction fee or $0 if using ETFs), iShares ETFs, and most major fund families. The breadth is the largest of the major providers.

Roth contributions. Fidelity supports Roth Solo 401(k) contributions, which becomes increasingly important under SECURE 2.0 — starting in 2026, certain high-income earners (prior-year FICA wages over $150,000 per IR-2025-111) must make catch-up contributions ($8,000 for age 50+) as Roth, not traditional. Plans without Roth support are non-compliant for affected participants.

The caveats — what Fidelity's off-the-shelf plan doesn't do:

No Mega Backdoor Roth. Fidelity's standard plan documents do not authorize after-tax contributions or in-plan Roth conversions, which are the two mechanisms required for Mega Backdoor Roth. To execute that strategy, you need plan documents from a specialized provider while keeping investment custody at Fidelity. Detail in Section 6.

No Form 5500-EZ filing. Once your Solo 401(k) balance crosses $250,000, IRS Form 5500-EZ is required annually. Fidelity does not file this for you. The penalty for late filing can reach $250 per day, capped at over $150,000 per year. The form itself is straightforward, but you have to know to file it. Many Solo 401(k) holders don't.

For a Solo 401(k) holder who doesn't need Mega Backdoor Roth and is willing to track their own 5500-EZ obligation, Fidelity is the lowest-friction, lowest-cost choice. The combination of $0 fees and broad fund access is hard to beat.

Schwab Solo 401(k): Free, Slightly Less Feature-Rich

Charles Schwab Individual 401(k) is structurally similar to Fidelity's: $0 setup, $0 annual, $0 commissions on stock and ETF trades. Schwab supports Roth contributions and meets SECURE 2.0 requirements.

The trade-off vs Fidelity is the fund universe. Schwab's Solo 401(k) holds Schwab mutual funds and Vanguard ETFs but historically excludes Vanguard mutual fund share classes from the platform (you can hold Vanguard ETFs, but not Vanguard mutual fund share classes for retirement accounts). For investors specifically wanting Vanguard institutional mutual fund tax efficiency or who already own Vanguard mutual funds elsewhere and want consolidation, Fidelity handles this cleanly while Schwab requires using ETFs instead.

For investors who use Schwab index funds (SWTSX, SWPPX, etc.) or use Vanguard ETFs (VTI, VXUS, BND), Schwab works fine — the ETF wrappers deliver essentially identical exposure to Vanguard mutual fund share classes at similar expense ratios. The difference is mostly cosmetic for index-focused investors.

White Coat Investor's analysis flags Schwab vs Fidelity as a near-tie for most users, with Fidelity edging out for fund-universe completeness. For Vanguard refugees specifically, Fidelity may feel more familiar (similar fund families available); for ETF-focused investors, Schwab is functionally equivalent.

E*TRADE Solo 401(k): Roth Comes Late, Legacy Account Limitations

E*TRADE (now part of Morgan Stanley after the 2020 acquisition) offers a Solo 401(k) at $0 setup and $0 commissions on stocks and ETFs. The complication: legacy E*TRADE accounts opened before recent platform updates may carry older fee structures with per-trade commissions or per-fund annual fees. The Carry 2026 review notes that newer features (including some Roth Solo 401(k) capabilities) require accounts on current plan generations — older accounts may need re-papering to access these features.

The practical implication: if you're opening a new Solo 401(k) at E*TRADE in 2026, it'll be on current plan terms with $0 fees and Roth support. If you're a legacy E*TRADE customer, verify your plan generation before assuming current fees and features apply. The re-papering process is straightforward but adds friction.

E*TRADE's main differentiator was historically being among the first major brokers to offer Roth Solo 401(k) — that advantage has eroded as Fidelity and Schwab added Roth support. Today, E*TRADE is a viable third option but doesn't have a clear advantage over Fidelity or Schwab for most freelancers.

Mega Backdoor Roth: The Strategy Off-the-Shelf Plans Don't Support

Mega Backdoor Roth is the highest-impact retirement move available to high-earning solo freelancers. The structure: after-tax contributions to your Solo 401(k) (above the standard $24,500 employee deferral and beyond the standard $72,000 total limit through different rules), then immediate in-plan Roth conversion. The result: up to $72,000+ of Roth contributions per year, far exceeding the Roth IRA limit ($7,500 in 2026).

The catch: this requires plan documents that explicitly authorize after-tax contributions and in-plan Roth conversions. The mysolo401k.net guidance is direct on this point: "You cannot use basic off-the-shelf solo 401(k) plans from providers like Fidelity, Schwab, or Vanguard for Mega Backdoor Roth strategies." The standard plan documents at Fidelity/Schwab/E*TRADE don't include the necessary provisions.

The path that does work: establish a Solo 401(k) plan through a specialized provider that offers customized plan documents — My Solo 401k Financial, Carry, or Solo 401k by Nabers Group are the three most-cited. Setup fees range from $500 to $1,500, with annual fees typically $125-$200. The investment accounts can still be at Fidelity or Schwab (the brokerage holds the money; the specialized provider holds the plan documents). The bookkeeping is more involved than off-the-shelf — the plan administrator handles reporting, but the freelancer needs to make the after-tax contributions correctly and execute the conversions on schedule.

The math for whether Mega Backdoor Roth is worth the setup complexity:

If your annual Solo 401(k) contribution is at or near the $72,000 limit ($80,000 if you're 50+), you're at the ceiling for traditional/Roth split contributions. Mega Backdoor Roth lets you exceed that ceiling on the Roth side specifically, providing tax-free growth for decades. For high-income freelancers in current 32-37% marginal tax brackets who expect to be in similar or lower brackets in retirement, the Mega Backdoor Roth math compounds substantially over 20-30 years.

If your annual contribution is below $50,000, Mega Backdoor Roth is overengineering — you have plenty of headroom in standard Solo 401(k) traditional + Roth contributions. Stay with off-the-shelf Fidelity or Schwab.

The threshold I'd use: if you're consistently maxing the standard Solo 401(k) at $72,000-$80,000 and want more Roth-side allocation, the $500-$1,500 specialized plan setup pays back in the first year of use. If you're not yet maxing the standard limits, focus on getting there before adding the structural complexity.

Decision Matrix and What I'd Do

Your situation	Recommended path
Current Vanguard customer (now Ascensus), balance under $50K, simple plan	Roll to Fidelity or Schwab — fee savings + better experience
Current Vanguard customer, balance $50K+	Roll to Fidelity for better fund universe; Schwab if ETF-focused
New Solo 401(k) buyer, simple needs (under $50K annual contributions)	Fidelity Self-Employed 401(k) — default winner
High-income freelancer maxing $72K+ annual contributions, want Mega Backdoor Roth	Specialized provider plan (My Solo 401k Financial / Carry) + brokerage at Fidelity
High-income freelancer with day-job 401(k) plus side hustle	Fidelity Solo 401(k); employer profit-sharing portion not affected by day-job 401(k) limits
Solo 401(k) holder approaching $250K balance	Set Form 5500-EZ filing reminder for the year you cross; off-the-shelf providers don't file for you
Hiring first W-2 employee	Solo 401(k) becomes non-compliant — convert to multi-employer 401(k) or terminate; talk to a CPA before hire

My situation: I have a Fidelity Self-Employed 401(k) for my freelance income, contributing through both employee deferral ($24,500 in 2026) and employer profit-sharing (25% of net SE comp, capped at $72,000 total). I haven't set up Mega Backdoor Roth because my freelance income hasn't consistently maxed the standard $72,000 limit yet — most years I'm in the $40,000-$60,000 contribution range, which has plenty of standard Solo 401(k) headroom. If my income crosses the threshold where I'm consistently capping the $72,000 limit, the next move is to set up a specialized plan through My Solo 401k Financial or similar and migrate my Fidelity custody under that plan structure.

If I were a Vanguard refugee in 2026 — which I'm not (I never had a Vanguard Solo 401(k)) — I would have rolled to Fidelity within 30 days of the Ascensus transition. The fee difference plus app quality plus fund universe makes the migration math obvious for any meaningful balance. Staying with Ascensus pending the class-action outcome is a reasonable holdout strategy for very small balances; for anything over $25,000-$50,000, the rollover pays back too quickly to justify waiting.

I'm not a CPA or financial advisor. The Mega Backdoor Roth strategy in particular has more moving parts than I've covered here — pro-rata rules, IRA basis tracking, the interaction with after-tax 401(k) contributions if you also have a workplace 401(k) — and high-income freelancers seriously considering it should run the numbers with a fiduciary advisor. The $1,000-$2,000 of advisor fees to set this up correctly is small compared to the multi-decade tax-free growth at stake.

For the threshold question of when retirement contributions matter most as a side hustler, see self-employed retirement accounts. For the AGI-management interactions where Solo 401(k) contributions reduce taxable income (and rescue Marketplace subsidies, etc.), see COBRA vs Marketplace health insurance. For the broader "$100K side hustle" milestone where retirement upgrade decisions cluster, see $100K side hustle financial checklist. And for the S-Corp election that interacts with Solo 401(k) contribution math, see when to elect S-Corp for LLC.

Still deciding between SEP IRA and Solo 401k as account types? See: SEP IRA vs Solo 401k.