There are no Shortcuts
when it comes to
IRS Compliance

At Benetrends, our goal is to protect our clients.

And not just our clients. We believe it is equally important to protect the entire ROBS (Rollover as Business Startups) industry. Recently, there has been an effort by some ROBS providers to communicate misinformation about the ROBS rules, as well as to trivialize the importance of maintaining a compliant plan on an ongoing basis.
We would like to take this opportunity to comment on some of those statements.

A $1,500 Tax Credit is only Available by Using a Proprietary Process

The Credit for Small Employer Pension Plan Startup Costs is found in Section 45E of the Internal Revenue Code (IRC) and is available to any business that meets the requirements of the statute, regardless of the Plan’s ROBS provider. Among other requirements, the Plan must have at least one (1) eligible employee who is NOT a Highly Compensated Employee.

Through Innovative Unique Plan Design, Administration Can be Minimized or Eliminated

By no means is a “Safe Harbor 401(k) Plan” innovative, nor unique. While there is no requirement to perform an “ADP Test”, other responsibilities are required such as annual participant notification requirements, and commitment to make an employer contribution. In addition, if an eligible employee is not given the opportunity to participate when becoming eligible, a contribution equal to 6.5% of pay must be made by the company on the participants behalf. Additionally, there are IRS restrictions on changing plan provisions during the year.

We believe good plan design should not be “cookie cutter” it should be unique and based on a full understanding of each client’s long and short-term goals and objectives.

Paying Fees to ROBS Providers After the Funds Have been Transferred to the Corporate Account Means NO PROHIBITED TRANSACTION RISK

Until an “Operating Company” is established, the underlying assets of the Corporation whose stock is held by the Plan are Plan Assets. Exactly when an “Operating Company” exists is subject to the interpretation of the Department of Labor (DOL). Paying fees to a ROBS provider from Plan assets would be a prohibited transaction, since many of the services provided by the ROBS provider are known as a “settlor” function. Fees associated with settlor function may not be paid for with Plan assets.

No Ongoing Plan Administration

Because ERISA laws are intricate and vast, and the penalties are steep for noncompliance, many CPAs choose not to get involved. In the case of a ROBS Plan, there are even more reasons to work with a pension professional. In addition to the “regular” plan compliance issues, there are the litany of rules surrounding the qualifying employer securities held by the Plan. We have seen among others, the following additional requirements associated with ROBS Plans that are often overlooked by those with less experience:

  • Form 5500 EZs are not permitted to be filed for ROBS Plans
  • Adequate Consideration Rules when Purchasing/Selling Stock
  • Annual Fair Market Value for Form 5500 Filing
  • Many clients own multiple companies which causes Controlled Group Issues
  • Testing to make certain the availability to Purchase Employer Securities is offered on a nondiscriminatory basis

It is our hope that ALL Rollover as Business Startups (ROBS) Plans, regardless of the provider, will be professionally administered and remain fully compliant.

Discuss your questions about ROBS compliance with a member of our team.
  • 1684 South Broad Street | Suite 130, Lansdale,
    Pennsylvania 19446

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Our Pledge to You

Our mission is to make every Benetrends client our champion. For over 35 years, our Rainmaker Plan® has been tested and proven to work, providing a means for more than 17,000 entrepreneurs to achieve their dreams of business ownership, creating both jobs and prosperity. We are so confident in the Rainmaker Plan design that we stand fully behind our work, backing every client with our Rainmaker Guarantee.

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