No! And nobody else should be doing it either. ERISA states that the transaction is exempt from being a prohibited transaction “if no commission is charged with respect thereto . . .” to which the IRS adds “to or from a ‘disqualified person’.” We are defined in the Internal Revenue Code as a “disqualified person” because we provide services to the plan. If the IRS found during an examination (IRS audit) of your plan that we had paid or received a commission by any name, the IRS could assert the investment of the funds into the stock of your new corporation was a distribution subject to taxes and penalties. A franchisor must disclose any commissions paid or received in its FDD and if it is so disclosed in the FDD it would thereby be disclosed to the IRS. Therefore, anyone who pays or receives a commission in respect to establishing these plans are putting their clients at risk with the IRS.

Because ERISA states that the transaction is exempt from being a prohibited transaction “if no commission is charged with respect thereto . . .” If we charged a variable fee instead of a flat fee for service, the IRS could assert that the variable fee was a commission, and therefore the investment of the funds into the stock of your new corporation was a distribution subject to taxes and penalties.

This is a VERY IMPORTANT question. 

Yes, under ERISA, a plan sponsor (the corporation that adopts the qualified retirement plan- i.e. YOU…) has fiduciary responsibility for the plan.  That means the owner (who is also a participant as a corporate officer and often the Profit Sharing Plan & Trust trustee) is legally permitted to administer the plan themselves; however, it creates a heightened fiduciary risk and is strongly discouraged.  Most ROBS (Rollover for Business Startups) facilitators and ERISA tax law attorneys insist on an independent TPA to reduce audit risk.  Also, correcting a compliance violation can be costly and time consuming and will involve the engagement of an ERISA tax law attorney.  The less familiar the attorney is about your plan documents and business history, the more expensive their support will be.  To avoid this risk, you should seek the services of a TPA familiar specifically with ROBS plan management and who utilizes and refers ERISA tax law attorneys familiar with ROBS plan documents and the special exceptions within the IRS and Department of Labor (DOL) guidelines and regulations uniquely applicable to the ROBS program.

Additionally, the IRS and DOL have consistently raised concerns about ROBS structures and emphasize that plan sponsors must follow ALL qualification rules (Form 5500 filings, nondiscrimination testing, ERISA reporting, valuation of employer stock, etc.). Because of the complexity and fiduciary liability, the IRS and DOL both recommend (and in audits, effectively expect) that ROBS sponsors retain a qualified independent third-party administrator (TPA) or other ERISA qualified and certified professional.

If the business owner tries to manage administration themselves, they take on all fiduciary, legal, and reporting obligations. Risks include:

1. Fiduciary Liability
2. Prohibited Transactions & Self-Dealing Violations
3. Complex Compliance Testing & Auditing Tasks
4. Audit & Enforcement Risk

As the plan sponsor, you are personally responsible for the timely filing and accuracy of your Form 5500 and the accompanying documents which support your annual filing.  Late filing fees are $750 per late filing, with a cap of $1,500 when filing muliple late fees.  Late filings can also trigger IRS and DOL penalties of up to $250/day with a maximum penalty of $150,000 per year.

You can use a different TPA (third party administrator) to file your annual Form 5500 tax documents, if you desire.  Since this is our core strength and knowledge area and we have over 25 years of industry experience managing ROBS accounts and working with the IRS and DOL, not to mention the accompanying extensive ERISA tax law experience our strategic and trusted attorneys possess specifically for ROBS and ERISA tax law exceptions, we strongly advise letting us serve as your TPA because we can ensure your Form 5500 annual administration and filing is being done correctly.  This will help lower the risk of audits and make things easier for you while also saving you money in the long run.  However, if you desire to take your plan eslewhere for TPA support at any time, we will help you and your new TPA with transferring your account and ensuring the handoff is smooth, professional, and complete.

Yes!  After you have received and deposited your money in the Corporate bank account, some of the first checks you should write should be to yourself in order to reimburse yourself for any start-up expenses, including the ERSOP plan startup fee and other fees involved with CPA’s or Attorney’s, etc.  Be sure to discuss the list of reimbursement items with your CPA related to your particular business situation.  Some reimbursements may be considered a distribution which incurs a tax declaration and some fees may be reimbursed directly with no issues.  If you are unsure, we would be happy to help review your list and discuss how reimbursement works.

No!  What you see is what you pay. 

If you require or desire services which go above and beyond the typical services covered in our program, then our hourly rate is generally $175/hour and we like to provide a custom and personalized quote for large or complicated projects.  Otherwise, we know what is needed to manage your ROBS plan and our services are all-inclusive.

We are experts at fixing and resolving ROBS-related problems.  Sometimes business owners come to us from other TPA’s with difficult situations and are seeking expert help to fix the problem and get their plan back on track.  These situations are unique and we need to do the proper project planning and solution resolution work and this can exceed our regular plan management services.  In those situations, we may charge a project fee to onboard the client and to get our hands around the problem.  Understandably, this may be a time-consuming endeaver and we value the time of our team and their expertise in ROBS management and problem solving. Therefore, if we assess a project fee then we will provide a detailed estimate of what we believe will be the most efficient and cost-effective solution towards solving the problem.  We will review it with you and we will not begin any work or charge you any fees until you are completely comfortable with our proposed solution.  Our goal in these situations is to rectivy your situation as quickly as possible, demonstrate our expertise, and win you over as an ongoing and satisfied client.

We are happy to welcome anyone with whatever situation they find themselves in, and while we try to help everyone with a ROBS related issue, there will be those occassions where we cannot help.  We will perform a full review and share our suggestions on possible resolutions options and we will also try to help you find the appropriate referral who can help.