Learn How Your Thrift Savings Plan Can Help!
Established during the Federal Employee’s Retirement System Act of 1986, the Thrift Savings Plan (TSP) offers federal employees and members of the armed forces the same benefits that 401(k) plans do for private citizens.
Defined as a contribution plan, the income or balance of your TSP account will depend on how much you, and if eligible your agency, put into your account during the time you were working and contributing. If you are a veteran looking to transition back into civilian life your TSP may be able to provide you the means to purchase or start a your own business.
DRDA CPAs & Business Consultants provides a self-directed 401k plan that allows individuals to access retirement funds, tax and penalty free, if being used to buy, start, or recapitalize an active business.
We call this type of structure a BORSA (Business Owners Retirement Savings Account) Plan. The IRS calls it a ROBS (Rollover as Business StartUp)
Based in the Internal Revenue Code and the ERISA Law of 1974 this tool is being used around the country by entrepreneurs desiring to access their retirement funds as a source of equity for this endeavor.
A BORSA Plan works like this:
• DRDA establishes C Corp for Client
• DRDA establishes 401k Profit Sharing Plan for C Corp
• Client rolls all of a plan (401k, TSP, etc), portions of plans, or multiple plans into the new 401k plan. In addition, more than one person can roll their plan(s) into this new 401k plan. This is a qualified rollover and is not subject to tax or penalty regardless of the client's age.
• Once funds are in the new 401k account, the client directs funds (all or a portion) into the new C Corp checking account. That's the physical movement of the money. What's actually happened is the 401k plan bought stock in the C Corp. The Plan holds the shares and the C Corp has the money.
The client has now funded his C Corp and is ready to buy or start a business. Many of my clients will leverage these funds against a loan (SBA or Conventional) to buy their business.
Many transitioning servicemen and women consider business or franchise ownership a great goal and a way to pivot the skills they have learned in service to our Country into a profit center for themselves. While most of our clients will use 401k or IRA funds in a BORSA Plan we have many veterans that accessed their Thrift Savings Plan (TSP) tax and penalty free and turned it into equity for their new business or franchise.