403b QUESTION:
I am thinking about using my 403b funds to fund my business, can this be done and would like to know how the process works timing, and fees associated with it.
403b ANSWER:
While a 403b cannot invest in one’s own business, yes a 403b can be transferred to the business financing 401k provided you are no longer working for the employer that sponsors the 403b and the 401k would then be invested in your C-corporation.
Also, in order to use 401k retirement funds to finance your own business, the business has to be one that will offer goods or services. Therefore, a C-corporation that offers investments will not qualify, for example.
You will also be required to work as a W-2 employee for the C-corporation, and can thus draw a fair salary based on hours worked and what others in the same industry make. For more on the salary rules, please see the following: https://www.linkedin.com/pulse/20141011003951-361793377-robs-401k-business-financing-how-much-salary-can-i-make
Process, Timing and Fees:
- Process: We take care of everything needed to fund your business with your retirement funds including setting up the corporation and the 401k plan, assisting with the transfer of the funds to ensure that no taxes or penalties are incurred and then documenting the transaction with corporate records such as stock certificates, bylaws, etc. Going forward, we provide all of the ongoing compliance support for the 401k plan including the annual 5500 filing, onboarding any eligible employees who wish to participate, keeping the plan up-to-date to ensure that it maintains its status as an IRS-approved qualified plan, mandatory plan testing, etc.
- Timing: Typically about 15 business days depending on how long it takes the funds to be released by the current plan administrator.
- Fees: We charge a flat setup fee which includes everything to set up and fund your business with your retirement funds as well as the first 12 months of our ongoing compliance support for the 401k. Starting 12 months later we charge an annual fee. For more information, please see the following link: https://www.mysolo401k.
net/401k-business-financing/ 401k-business-financing- pricing/
