Choosing the right ROBS 401k provider can be a daunting task, but it doesn't have to be. The provider you choose will play a significant role in the success of your retirement plan, so it's essential to do your research.
ROBS 401k providers offer a range of services, including plan administration, investment management, and employee education. Some providers specialize in specific industries or business sizes, while others offer more comprehensive services.
When selecting a ROBS 401k provider, consider the fees associated with their services. According to the article, some providers charge a flat fee, while others charge a percentage of the plan's assets under management.
A good ROBS 401k provider will also have a strong track record of customer satisfaction and a reputation for excellent customer service.
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Choosing a Provider
Choosing a ROBS provider can be overwhelming, but doing your homework early will help you identify the provider that will best support you and your business throughout the ROBS process.
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Look for a provider with at least a decade of ROBS success and a solid reputation. A reputable provider will have a history of performing over 1,000 rollovers a year and be recognized as a leader in the industry.
It's not just about the number of transactions, though - a good provider will also have subject-matter experts with extensive experience working with entrepreneurs. They'll work with legal and tax professionals to minimize the risk of creating taxable events or IRS infractions.
A trustworthy provider stands behind their clients in the case of an audit, paying for their client's legal representation if needed. They should also have a spotless audit record, with no taxable events occurring as a result of a ROBS arrangement.
Be wary of providers that outsource their plan administration services - it can result in more headaches for you, especially if the outside firm isn't familiar with your business. Instead, look for a provider that employs an in-house plan administration team, an on-site compliance team, and attorneys to ensure you get the support you need throughout the process.
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Understanding Costs and Support
As you explore ROBS 401k providers, it's essential to understand their costs to avoid any surprises. Most providers charge an initial setup fee of around $5,000, which generally includes the creation of your new C corp and 401(k) plan, as well as guidance on completing the rollover itself.
You should also look for transparency in pricing and make sure the provider includes audit protection, in-house legal, outside counsel, business valuation, and plan administration services as part of their fee.
Providers also charge a monthly fee between $100 – $200 for ongoing plan administration, which includes annual reporting and compliance reviews to ensure your 401(k) is safe from the IRS.
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Research and Planning
Most 401k providers require a minimum of three to five years of business operation before they'll consider offering a 401k plan.
Before selecting a 401k provider, it's essential to research and compare different options to find the best fit for your business.
Plan Structure and Timeline
When selecting a ROBS provider, it's essential to understand their process and timeline. A good provider should give you the details of their ROBS process upfront, and their timeline should be reasonable.
Most rollovers take about four weeks, but an efficient firm can expedite the process if needed. This is why it's crucial to choose a provider with a history of completing transactions on time.
A ROBS provider with no history of audits might seem like a good sign, but it can actually be a warning sign of inexperience. Experienced providers have navigated audits and understand the process, which is a major advantage.
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Process and Timeline
The ROBS process can take about four weeks, but an efficient firm can expedite the process if needed.
A ROBS provider should give you the details of their ROBS process upfront, including a reasonable timeline.
Most ROBS transactions are unique to you, the small business owner, so a ROBS provider should provide individualized support.
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A ROBS provider with no history of audits might actually be a warning sign of inexperience, as the IRS will audit retirement plans from time to time.
A ROBS provider who has experienced audits is likely better off, as they understand the process and their ROBS structure is already proven sound to the IRS and DOL.
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Harnessing the Structure's Advantages
ROBS and BORSA structures are exclusively compatible with C-Corps, making them a viable option for business owners who want to utilize a 401(k) profit-sharing plan.
C-Corps permit a 401(k) profit-sharing plan to serve as a shareholder, which is a unique advantage over S corporations and partnerships.
The C-Corp structure presents tax advantages that S corporations and partnerships cannot replicate, making it a valuable option for business owners.
Historically, C-Corps were viewed as the entity choice of last resort due to potential for double taxation, but this stigma should not deter business owners from considering this structure.
C-Corps present a unique opportunity for business owners to harness the advantages of the ROBS/BORSA structure and take control of their retirement savings.
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Frequently Asked Questions
What are the downsides of Robs?
Robs financing comes with significant risks, including potential loss of retirement savings and high setup and maintenance costs. Carefully weigh these factors before proceeding
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