Tapping into retirement accounts for business funding
ROBS Retirement Plans Targeted
An IRS memorandum has been issued containing audit guidelines for a version of a qualified plan being marketed as a means for prospective business owners to access accumulated tax-deferred retirement funds without paying applicable distribution taxes in order to cover new business start-up costs. The memorandum refers to these arrangements as ROBS (rollovers as business startups).
IRS indicates that they "may serve solely to enable one individual's exchange of tax-deferred assets for currently available funds, by using a qualified plan and its investment in employer stock as a medium. This may avoid distribution taxes otherwise assessable on this exchange. Although a variety of business activity has been examined, an attribute common to this design is the assignment of newly created enterprise stock into a qualified plan as consideration for these transferred funds, the valuation of which may be questionable."
This obviously has to do with the kind of plans that that I have discussed on numerous occasions, such as those offered by companies like BeneTrends. I haven’t seen any response to this yet from BeneTrends or any of the similar companies; but I’m hoping their plans will withstand any IRS scrutiny that may come their way because they are a huge help to small business owners, as well as a more productive investment vehicle for the retirement funds than the big stock market or other conventional vehicles.