Guide for Choosing the Right ROBS Provider

We speak to business owners and aspiring entrepreneurs every day who are considering a rollover as business startup (ROBS) in order to access their 401k, IRA or other retirement funds for business financing.   They often note that there are a number of ROBS providers in the market and seem to struggle with how to choose the right ROBS provider.   Selecting a ROBS provider is certainly an important decision as a ROBS transaction will impact not only the success of your business and your retirement savings but could also dramatically affect your financial future.  

Below are the most important considerations when deciding which ROBS provider to work with.

 

ROBS PROVIDER CONSIDERATION #1: EXPERIENCE & EXPERTISE

 

While the IRS has consistently recognized that a rollover as business startup transaction is a legitimate means to use retirement funds for business financing without incurring taxes and penalties, they have also found that some ROBS 401K plans contain compliance violations.   This is not surprising as the ROBS rules are complex with pitfalls for the uninformed.  For this reason it is important to work with a company that specializes in ROBS transactions rather than a provider that “dabbles” in ROBS 401k plans.  Moreover, you should select a provider who will make sure that you work directly with an attorney and other compliance professionals throughout the entire ROBS business financing process.  These attorneys and professionals can ensure that you satisfy the ROBS requirements that apply to your specific circumstances.

If you select My Solo 401k Financial:

  • You will work with a company that specializes in ROBS transactions. My Solo 401k Financial has helped thousands of clients and offers an IRS-approved 401k/PSP plan that will allow you to fund your business with 401k, IRA or other retirement funds without paying taxes or penalties.
  • Throughout the entire 401k Business Financing process, you will work with directly with Our Leaders who are a Harvard Law-trained attorney and a Compliance Officer with over 30 years of combined experience.
  • This experience and expertise are backed by our Audit Guarantee.

 

ROBS PROVIDER CONSIDERATION #2: FAIR PRICING

As fellow business owners the Leaders of My Solo 401k Financial understand the importance of minimizing business expenses and staying “lean” in order to achieve success.  In fact, one of the primary advantages of employing a ROBS 401k/PSP to fund your business is the ability to minimize or avoid the need to incur debt which is an expense that can be detrimental to a business – particularly a new business.  For this reason, we are committed to help our clients by keeping costs low and work hard to maintain our very competitive pricing.  In fact, our ROBS 401k fee is typically about $2500 less than the other major ROBS providers over the first year.  There are several important reasons for the difference:

  • It is common industry practice to pay referral fees to brokers, etc. that often amount to upwards of $1500.  My Solo 401k Financial has NEVER paid and has a policy against paying such fees.  By passing this savings onto our clients we stay committed to keeping costs low.
  • The first year of ongoing compliance support is included within our initial fee.Given that the significant ongoing compliance requirements for a ROBS 401k/PSP plan don’t typically begin until the 2nd year, we made a business decision to forgo charging the first annual fee as we felt that we couldn’t justify charging a fee for work that doesn’t typically start until after the first 12 months.

If you select My Solo 401k Financial:

  • You will be informed of all of the initial and ongoing costs associated with our 401k Business Financing plan even before you decide whether to work with us.
  • You will incur fair fees that are typically $2500 less than the other major ROBS providers over the first year without sacrificing any service or expertise.

 

ROBS PROVIDER CONSIDERATION #3: RESPONSIVE SERVICE

At My Solo 401k Financial, we understand that that time is of the essence. Quick access to your funds is imperative as you may need to meet a closing deadline or for another important and time-sensitive business reason.  Therefore, it is important to choose a ROBS provider who is very responsive to your questions and business needs to ensure that your 401k Business Financing transaction is completed as fast as possible.   

Once you select us as your ROBS provider, we are laser-focused on guiding you through the entire 401k Business Financing process as fast as possible.  The pacesetter for the ROBS transaction is typically the time that it takes the administrator(s) of your current retirement account(s) to transfer your retirement funds to your new ROBS 401k plan (e.g., former employer 401k, Rollover IRA, etc.).  Given that this transfer step is usually the part of the process that takes the longest amount of time, we start the transfer process on Day 1 including completing the transfer paperwork to ensure that the funds are transferred quickly and in a manner that won’t trigger taxes or penalties.  We are well-versed in these forms and in navigating the transfer process.  In our experience this may include contending with companies that don’t make it easy for you to transfer out your retirement funds.  With the assistance of an experienced team such as My Solo 401k Financial, we are with you at every step of the way to “make it easy”.

If you select My Solo 401k Financial:

  • You will work with a company that provides highly responsive and superior customer servic.  Our glowing customer reviews  are a testament to this.  Our “A-plus” Better Business Bureau rating with  no customer complaints further demonstrates our dedication to ensuring that our clients are provided exceptional customer service.
  • You will work with a ROBS provider that is laser-focused on completing your 401k Business Financing transaction as fast as possible including a team that has the experience and expertise to ensure that your retirement funds are transferred from your existing account as fast as possible.

 

ROBS PROVIDER CONSIDERATION #4: EDUCATION, NOT SALES

Given the number of important compliance requirements applicable to a rollover as business startup transaction, it is important that you understand those requirements at the outset.  Therefore, it is important to work with a ROBS provider that emphasizes education (rather than sales) so that can you make an informed decision whether to fund your business via a ROBS transaction.  Moreover, you should understand not just the initial requirements to fund your business (e.g. use of a C-corporation, an IRS-approved qualified plan, etc.) but also the ongoing requirements and costs (e.g., offering the plan to eligible employees, Form 5500 filing requirement, bonding costs, etc.).  

Before proceeding with our ROBS 401k/PSP Business Financing plan, all of our clients meet with our attorney to review the ongoing and initial requirements and how those requirements will apply to their situation.  We make sure to review the ongoing costs including our annual fee and third-party costs associated with the plan. During this review, we may discover that a more cost-effective and simplified way to fund your business may be a Solo 401k Loan instead of a ROBS transaction.  For example, you may find that a Solo 401k loan is a preferable means to fund your business if your business does not have full-time employees and you are seeking to access less than 50% of your retirement funds (not to exceed $50K).

If you select My Solo 401k Financial:

  • You will meet with our attorney to understand the initial and ongoing ROBS 401k/PSP requirements and how they will apply to your business.  During this review, we may discover that a better option to fund your business with retirement funds is our Solo 401k loan for business financing.
  • You will never work with a sales person since we don’t have any.  Instead you will work with professionals who emphasize education and compliance rather than sales and commissions.

 

ROBS PROVIDER CONSIDERATION #5: RECORDKEEPING & ONGOING COMPLIANCE SUPPORT

Funding your business via a ROBS 401k/PSP is not merely a one-time transaction.  There are a number of ongoing important compliance requirements that must be satisfied.  At the end of day, your business will sponsor a 401k plan and it will be imperative to keep the plan in compliance.  The compliance requirements do not apply to all plans in the same way and the particular requirements that apply to you will depend on the facts and circumstances of your business (e.g., number of employees, 401k loans, contributions, etc.).  Therefore, as your business grows and develops, it will be important to choose a ROBS provider with the experience and expertise necessary to help you navigate the ongoing compliance requirements that apply to your specific 401k plan.  Moreover, you will want to consider whether the specific person at your ROBS provider has the requisite expertise to understand and identify compliance issues that might apply to your 401k plan and whether this person will be there for you and for the life of your account.  

We are 401k and IRA retirement plan experts (this is all we do 24/7) and as such we have the experience and expertise to identify the compliance requirements that will apply to your business.  Moreover, rather than a salesperson who may move on to another company leaving you to build a new relationship with whomever is left to handle your account, you will work directly with our owners throughout the entire 401k Business Financing process and will therefore be intimately familiar with your account for the life of your 401k plan.  This important service difference truly sets us apart from the rest.

If you select My Solo 401k Financial:

  • You will work with a company that provides all of the ongoing compliance support for your 401k plan which will ultimately allow you to focus on growing your business.
  • You will work directly with our owners throughout the entire 401k Business Financing process and beyond which will ensure that you always have someone who is familiar with your 401k plan.

 

Insider Tips for Choosing the Right ROBS Provider

TIP # 1 – Look for a ROBS provider that doesn’t pay referral fees to business brokers, etc. but instead passes on the savings to the client.  The savings will typically amount to $1,000 at initial setup.  

TIP # 2 – Look for a ROBS provider that doesn’t start charging a maintenance fee until the 2nd year as most ongoing compliance requirements don’t typically start until the 2nd year.  This will often save you about $1500 over the first 12 months.  

TIP # 3 – Be wary of a ROBS provider offering a discount in order to encourage you to sign up as this suggests that their standard price may be too high and may indicate a culture of sales rather than a focus on compliance.   Moreover, any perceived savings may be quickly given back if the company charges monthly fees that will typically recoup any discount in just a matter of months.

TIP # 4 – Look for a ROBS provider that allows you to speak to their compliance officer and/or attorney when you first call so that you can get all the facts on Day 1 and not from a salesperson.  If you ask questions and are continually placed on-hold in order to “find the answer” or “double-check with someone” it’s a good indication that the person you are speaking with is not well-versed in ROBS transactions.

TIP # 5 – Work with a ROBS Provider who is seeking to build a long-term relationship such as by having you work directly with the owners of the company from Day 1 instead of a salesperson who then passes you off to various customer service representatives who may leave the company and leave you left to build a relationship with someone else at the company.

TIP # 6 – Look for a  ROBS provider that offers record keeping and ongoing compliance support as the regulatory guidance indicates that most violations occur in a failure to comply with the ongoing ROBS requirements.

TIP # 7 – Avoid a ROBS provider who is trying to upsell you on other services that are not essential to the ROBS 401k transaction such as payroll, etc. – especially before you may have even completed the business financing transaction.  Not only does this indicate that they are not 100% focused on completing the core service that they are paid to provide but it is also indicative of a company that is more focused on sales than ensuring that your business is funded as quickly as possible and in a compliant manner.

TIP # 8 – Look for a ROBS provider that proactively explains not only the initial ROBS requirements but the ongoing compliance requirements and costs before you even proceed with the transaction.  This is important to ensure that you make an informed business decision and also indicates that the company is focused on your long term compliance and success over making another sale.  

TIP # 9 – Look for a ROBS provider who explains how long the 401k business financing process takes from start to finish including how much time it takes for each step in the process.  This will be especially important as you are trying to schedule other business transactions that are dependent on the 401k business financing (e.g., a closing, etc.).

TIP # 10 – Look for a ROBS provider that is well-versed in the process to transfer your money from your existing 401k, IRA or other retirement account(s) and specifically from the financial institution(s) holding your funds (e.g., John Hancock, Vanguard, Fidelity, etc.).   Not only is it important to ensure that the funds are transferred in a manner that will not incur taxes or penalties but an experienced professional can also ensure a smooth transfer process so that the funds can be used to finance your business as quickly as possible.

TIP # 11 – If you are looking to access less than 50% of your retirement savings (not to exceed $50K) in order to start or fund a business with no full-time employees, look for a ROBS provider that also offers a Solo 401k as a Solo 401k loan for business financing may be a more cost-effective and simplified option for you.

TIP # 12 – Look for a ROBS provider who has 1000s of clients and 100% audit success rate as this is strong indicator of an excellent combination of experience and expertise.

TIP # 13 – Look for a ROBS provider who stands behind their offering with an audit guarantee including a commitment to pay for outside legal counsel in the event that your ROBS 401k plan is challenged. 


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