Starting a Business Later in Life
By James Barrera
Before moving forward put together a business plan. It’s not necessary to expend a lot of time on this document, as long as you can clearly state your intended strategy and clearly define the scope of your intended sales, marketing, and financing efforts.
Starting a business at any age can be a daunting experience, but doing so after age 50 offers its own challenges and opportunities. The risk factor is as high as it is for a business owner of any age. On the other hand, you have a depth of experience and knowledge that is not present in most budding 25-year entrepreneurs.
If you are considering a startup of some kind in your fifties or later be sure you can answer the following questions.
Are you prepared?
This is no time to jump into the marketplace just to see what happens. If you think you have a great business idea then test it against a thorough market analysis. You need to know who your potential competitors and customers are, but even more critically, if there’s likely to be a genuine demand for your product or service.
Before moving forward put together a business plan. It’s not necessary to expend a lot of time on this document, as long as you can clearly state your intended strategy and clearly define the scope of your intended sales, marketing, and financing efforts.
Do you have passion?
For business owners aged 50 and older, there is no getting around a simple fact: you’re just not as young as you used to be. Starting a business requires the stamina to put in many long hours upfront. Not everyone can meet the physical demands of hard work and lack of sleep. You must have passion for this new business. Making money cannot be your sole motivator – since you may not see profits in the early stages.
Have you looked at the costs?
You are going to need start up funds. Whether you put up your hard dollars, obtain a loan for financing, or tap into your retirement funds tax and penalty free you need to find an accountant experienced in new business ventures to realistically assess the likely startup costs. The plus side here is that by age 50 or greater many have managed to put away a substantial amount of money in their 401k/IRA accounts. DRDA’s self-directed 401k program – the BORSA Plan – would give you access to these funds without tax or penalty erosion.
How can you build on your experience?
Starting a business later in life gives you the unique opportunity to draw on a lifetime of experience. By now you have a much better sense of your strengths and weaknesses. Chances are you have also accumulated a network of contact who can help you along the way, either directly or through referrals to people who can help you.
Are you considering business ownership at age 50+? One of our Business Consultants would be happy to offer you a free initial consultation. Give us a call at 281-488-2022.
- Published in ROBS 401(k), ROBS 401k Provider, Small Business, Starting a Business
Guide to Dissolving a Corporation in Texas
By: Bryan Uecker, QPA, QPFC, AIF, AIFA
For many business owners, there may come a time when operating a corporation no longer aligns with their financial or strategic objectives. Whether due to business restructuring, financial challenges, or other factors, following the correct dissolution procedures is essential to avoid legal and financial consequences. At DRDA, LLC, we can help you navigate the complex steps involved in dissolving your corporation.
What is Corporation Dissolution?
Corporation dissolution refers to the formal process of ending a corporation’s legal existence. Dissolution may occur voluntarily, through a decision by the shareholders or board of directors, or involuntarily, by court order in cases of fraud, mismanagement, or failure to comply with state requirements.
In Texas, the Texas Business Organizations Code (BOC) outlines the process for corporation dissolution and termination. By following these guidelines, corporations can avoid liabilities related to unresolved debts and ensure a structured wind-down of business activities.
Steps to Dissolve a Corporation in Texas
Dissolving a corporation in Texas involves several steps and compliance with state laws and regulations. Although specific steps may vary depending on your corporation’s unique circumstances, the general process includes the following:
- Initiate the Dissolution Process
Once you decide to close the corporation, hold a board of directors meeting to formally approve the decision. Two main options exist to begin voluntary dissolution:
– Board of Directors Resolution: Secure a resolution from the board of directors approving the dissolution, and document it in the corporate records.
– Unanimous Shareholder Approval: If required by corporate bylaws, gain unanimous approval from shareholders, either through a vote or written consent. For small businesses, shareholders often also serve as directors, making this step more straightforward. Document this approval in the corporate . - File Articles of Dissolution
Once approval is secured, prepare and file Articles of Dissolution with the Texas Secretary of State to officially notify the state of the corporation’s dissolution. Information required includes the corporation’s name, dissolution date, and a statement affirming that debts and obligations have been addressed. - Conduct the Wind-Up Process
After filing for dissolution, your corporation remains active solely to wrap up its business affairs. During this process, the corporation must:
• Cease business operations except for those necessary for final transactions
• Notify creditors
• Liquidate assets
• Settle outstanding legal matters
• Pay debts, taxes, and liabilities
• Distribute any remaining assets to shareholders - Obtain Tax Clearance
Before completing the dissolution, you must obtain tax clearance from the Texas Comptroller of Public Accounts. This includes paying any outstanding state taxes, filing all required tax returns, and securing a Tax Clearance Letter from the Comptroller’s office. - Notify Creditors
Provide written notice of the dissolution to all known creditors, allowing them a specified timeframe to submit claims against the corporation. - Cancel Business Registrations
Cancel any business registrations, licenses, or permits held by the corporation with state or local authorities to prevent future fees or reporting obligations. - File Final Tax Returns
Complete and file final federal and state tax returns, reporting the corporation’s termination and any capital gains or losses, to ensure compliance with tax obligations.
Following these steps can streamline the dissolution process and help prevent issues. If you’re ready to dissolve your corporation, reach out to the team at DRDA, LLC for expert guidance and support through each phase of the process.
- Published in ROBS 401(k), ROBS 401k Provider, Small Business
IRS Updates: 2025 Contribution and Benefit Limits Released in Notice 2024-80
By: Bryan Uecker, QPA, QPFC, AIF, AIFA
The IRS has announced the 2025 contribution and benefit limits in Notice 2024-80, released on November 1.
Key Contribution Limits for 2025:
- 401(k), 403(b), 457, and Thrift Savings Plans: The standard contribution limit for these plans increases to $23,500, up from $23,000 in 2024.
- Catch-Up Contributions for Ages 50 and Over: The catch-up contribution limit remains at $7,500, allowing individuals aged 50 and older to contribute up to $31,000 across 401(k), 403(b), most 457 plans, and the Thrift Savings Plan.
- Special Catch-Up Contributions for Ages 60 to 63: SECURE 2.0 introduced an additional catch-up provision for individuals ages 60 through 63. In 2025, this special catch-up amount is $11,250 for 401(k), 403(b), and most 457 plans, allowing for a total contribution limit of up to $34,750 for these participants.
- Defined Benefit and Contribution Plans (IRC Section 415): The annual benefit limit for defined benefit plans rises to $280,000 (up from $275,000), and the limit for defined contribution (DC) plans increases to $70,000 (up from $69,000).
Other Key Adjustments:
- Annual Compensation Limits: The maximum compensation considered for qualified plans is now $350,000 (up from $345,000).
- Top-Heavy Plan Key Employee Definition: Limit increased to $230,000 (up from $220,000).
- Highly Compensated Employee Definition: Raised to $160,000 from $155,000.
These 2025 updates, including special catch-up contributions for ages 60-63, provide increased flexibility and savings opportunities for retirement planning.
- Published in ROBS 401(k), ROBS 401k Provider, Small Business, Starting a Business
Are You Ready to Be the Boss?
By James Barrera
Which are you – Manager, Leader or Both?
In an ever-increasing competitive workplace, how we show up matters. If you want to get ahead, you must show up as a leader – not only a manager. The difference between leadership vs management is big, and the distinction between the two matters. Not every manager is a leader, and not every leader is a manager, the ability to balance both is a feat many of us aspire to achievement.
A successful business owner needs to be both a strong leader and manager to get their team on board to follow them towards their vision of success. Leadership is about getting people to understand and believe in your vision and to work with you to achieve your goals while managing is more about administering and making sure the day-to-day things are happening as they should.
What Is Management?
Managers make the business world go around. When goals and objectives are set, managers are the implementers. They get things done. Management requires planning, organizing and controlling the various aspects of projects and the related outcomes. Managers are process oriented. They rely on other people, primarily subordinates, to complete tasks and move projects along. Managers delegate set deadlines and evaluate work product. They also course-correct when needed.
What is Leadership?
Management is an essential skill required to perform effectively. It is also a foundational skill that can evolve into leadership. But leadership is a combination of personal qualities that inspire others to follow. A leader is not a power of authority, but a process of social influence which maximizes the efforts of others toward the achievement of a greater good.
What is true leadership? Many times, when you come across the word leader you see the word follower aligned in some way. Leadership is not about attracting others to follow. This conveys a sense of power, authority, and control that might serve well in the short term by getting others to fall into line through conformity, but it doesn’t create the conditions necessary for sustaining change.
Great leaders don’t tell people what to do, but instead drive them to where they need to be. There is no agenda to create a group of followers or disciples. True leaders know that their success is intimately tied to the project and its results. The path to achieve a goal is predicated on how effective the team responds and interacts with each other and the leader. It is a team approach where each person in the organization knows that he or she has an important role to play. Leadership is all about action not position or title.
Some of the best leaders never had a title. What they did have was the tenacity to act on a bold vision for change to improve outcomes and increase performance. These people may be overlooked because they don’t possess the necessary title that is used to describe a leader in a traditional sense. A Leader, from the perspective of society is not a virtue associated by a title, such as manager, director, supervisor, but more by character, presence and action.
The fact that we are surrounded by these people each day both physically and virtually. They are colleagues, mentors, and staff who have all acted to initiate meaningful change in their teams and work environment. These people don’t just talk the talk, but they walk the walk. They lead by example in what might be the most impactful way possible – Leading by Example. These true leaders do not expect others to do what they are not willing to do. The best part is that these unsung heroes do not need a title to make a difference. They also don’t need a title to be a force of change.
If you look on the internet you will find thousands of articles depicting traits and styles of what makes a good leader. For most of us we have identified what traits are important by evaluating our current supervisors and determining what differentiates them from being a good leader. In retrospect we tend to place ourselves in their shoes and begin envisioning how we would do things differently. Our impressions distinguish what attributes we place value on to determine what makes a good leader.
The best leaders work to improve themselves Continuously and do the following on a consistent basis:
Learn
Learning is the work. Great leaders take professional growth seriously as they know there is no perfection in any position, just daily improvement. Leaders make the time to learn and get better daily. They also make their learning visible to inspire others to follow suit. Leaders who love their work are always learning.
Empower
A key element of effective leadership is to empower others to take risks, remove the fear of failure, and grant autonomy to innovate. People that are empowered find greater value in the work they are engaged in. Empowerment leads to respect and trust, which builds powerful relationships where everyone is focused on attaining specified goals.
Adapt
Everything can change in a heartbeat. As such, leaders must embrace a sense of flexibility and openness to change accordingly in certain cases. The ability to adapt to an array of situations, challenges, and pressures are pivotal to accomplish goals. Success in life is intimately intertwined into an organism’s ability to adapt in order to survive. As leaders adapt, they evolve into better leaders.
Delegate
A leader knows the importance of communication and trust. The decisiveness to delegate certain tasks and responsibilities is paramount for team-esteem. It builds confidence in others in their ability as co-leaders of an organization even if they don’t have a fancy title. It also allows leaders to apply more focus to areas of greater importance.
Engage
In the sharing economy there might not be anything more important than information. Leaders understand this fact and develop strategies to authentically engage their clients through multi-dimensional communications, by taking control of public relations, and developing a positive brand presence. Increased engagement results by meeting prospects where they are at, encouraging two-way communications, and becoming the liaison of the brand.
Reflect
It is quite difficult to find a great leader who does not reflect daily on his or her work. Reflection in a digital world can take many forms and results in greater transparency. It is not how one chooses to reflect, but an emphasis to integrate this process consistently that defines a great leader.
Serve
It’s not just what you say, but more importantly what you do. The most effective leaders work constantly to meet the needs of others while building them up in the process. They make it clear that it is not about them. Serving others taps into one’s heart and soul. It is in the moment of service to others that true leaders rise up in esteem, prestige, and industry.
You are in Control
The perception of the term leader is evolving, and it begins with you regardless of your position. As an aspiring leader, setting high standards requires that you develop a strategic and compelling vision for who you want to be and what you want to achieve. It is that vision that will provide you with the drive and perseverance to attain your leadership goals. Herein lies the first key in transforming your world into a better place. Never underestimate the power that you have. You are part of the solution!
Are you interested in learning more about DRDA’s ROBS structure, the BORSA™ Plan? Contact Bryan Uecker by sending an email (bryan.uecker@drdacpa.com) today for a free consultation.
- Published in ROBS 401(k), ROBS 401k Provider, Small Business, Starting a Business
BORSA and SECURE 2.0 Mandate for Automatic Enrollment
By: Bryan Uecker, QPA, QPFC, AIF, AIFA
Key Points:
• Effective for plan years starting after December 31, 2024.
• New 401(k) and 403(b) plans are required to have automatic enrollment.
• The automatic enrollment feature must comply with an eligible automatic enrollment arrangement (EACA).
• Participants must be enrolled automatically:
– Initially at a rate of a minimum of 3% (maximum 10%).
– Increased annually by 1%, reaching at least 10% (maximum 15%).
• Contributions must be invested in a qualified default investment alternative (QDIA).
Exempt Plans:
• SIMPLE 401(k) plans.
• Plans established before December 29, 2022 (date of document signing, not effective date).
• Governmental or church plans.
• Plans by businesses under 3 years old.
• Plans by employers with 10 or fewer employees.
Most BORSA™ plans adopted after December 29, 2022, will qualify for the exemptions based on the company’s age or size. However, consider the following scenarios with recent BORSA™ clients:
Scenario 1:
A couple establishes a new C-Corp and a BORSA™ to acquire two Home Health Care businesses with over 30 employees in 2023. The C-Corp 3-year exemption applies until 2026. Mandatory automatic enrollment begins on January 1, 2027.
Scenario 2:
DRDA takes over an existing ROBS plan in 2023, which lacks a 401(k) feature (a peculiarity of this competitor). The client adds a 401(k) with a safe harbor 3% non-elective contribution and converts the profit-sharing scheme to a cross-tested formula targeting key employees. Although the plan was established in 2015, adding the 401(k) triggers the requirement for automatic enrollment by January 1, 2025.
Scenario 3:
The owner of a 5-year-old business with 8 employees plans to set up a BORSA™ for capital infusion. The business expects to hire 3 or more employees within a year. According to the rule, automatic enrollment becomes mandatory “not earlier than the date that is one year after the close of the first taxable year with respect to which the employer normally employed more than 10 employees.” If this occurs in 2025, automatic enrollment starts on January 1, 2027.
Although many BORSA™ clients start exempt from mandatory EACA rules, growth and time may necessitate compliance in the future.
- Published in ROBS 401(k), ROBS 401k Provider
Maximizing Retirement Potential: Exploring SECURE 2.0 Roth Match and Non-Elective Contributions
By: Bryan Uecker, QPA, QPFC, AIF, AIFA
The retirement landscape is evolving with the introduction of the SECURE Act 2.0, bringing forth pivotal changes in retirement savings options. Among these enhancements are the broadened horizons of Roth contributions and the introduction of Roth Match and Non-Elective Contributions. In this article, we’ll delve into these progressive strides, elucidating how they can empower individuals to forge a more resilient financial future.
Understanding SECURE 2.0 Roth Match and Non-Elective Contributions:
In addition to the conventional practice of designating salary deferrals as Roth contributions, participants will soon wield the ability to label any employer contribution – whether match or non-elective profit sharing – as Roth. Despite this adjustment, employers will still claim a deduction for the employer contribution. At year-end, participants will receive a 1099R delineating the contribution as a taxable Roth conversion.
Benefits of SECURE 2.0 Roth Contributions:
1. Tax-Free Growth: Roth contributions offer the invaluable benefit of tax-free growth, enabling investment earnings within Roth accounts to accumulate tax-free over time. This translates into considerable tax savings during retirement, as withdrawals from Roth accounts typically remain tax-free.
2. Diversification of Retirement Income: Integrating Roth contributions into retirement savings furnishes individuals with enhanced flexibility in crafting retirement income strategies. By striking a balance between traditional and Roth accounts, retirees can adeptly manage their tax obligations and optimize their retirement income streams.
3. Exemption from RMD Rules: Roth IRA and Roth 401(k) accounts are exempt from the Required Minimum Distribution (RMD) rules, making them an ideal vehicle for wealth transfer to heirs.
Despite the promising prospects, a few obstacles must be addressed before plans can seamlessly adopt this provision. Payroll and recordkeeping systems are currently racing to develop the capabilities to accommodate these new Roth sources, and employers will need to amend their plan documents accordingly.
Conclusion:
SECURE 2.0 Roth Match and Non-Elective Contributions herald a significant leap forward in retirement savings options, offering individuals heightened flexibility, tax efficiency, and savings potential. By embracing these innovative features, both employers and employees can take proactive strides toward fortifying their financial futures. With meticulous planning, informed decision-making, and strategic implementation, SECURE 2.0 Roth contributions can chart the course for a more prosperous retirement journey.
- Published in ROBS 401(k)
BORSA/ ROBS Exit Strategies
By: Bryan Uecker, QPA, QPFC, AIF, AIFA
When you enter into any structure, it’s wise to know how to exit it as well. There are essentially four avenues for clients to exit the BORSA structure, each depending on where they aim for the value growth to accumulate.
First, there’s the “Stay the Course” approach, where business owners utilize their retirement savings accounts to invest in their enterprises. By funneling existing retirement funds into the business and reinvesting the accumulated value back into the retirement account, individuals expedite their wealth accumulation, often outstripping stock market investments. For those inclined towards this method, the exit strategy is clear: maintain the current trajectory and stay the course. Funds are introduced into the BORSA plan, invested in the C corporation, utilized to operate and expand the company, and upon selling the company, the proceeds are reinvested into the BORSA plan. Subsequently, the company can be liquidated, the retirement plan closed, and the funds rolled back into an IRA, effectively restoring the initial financial structure. At this point, individuals are poised to enjoy their retirement with a substantial deferred income nest egg.
Alternatively, some individuals view the BORSA as a mere launching pad, using their retirement funds for an initial capital infusion but aiming to replenish the money in their retirement accounts swiftly and grow the business’s value personally outside the plan. We refer to this strategy as the “Unhook“. This entails a nuanced approach—let’s say the company generates $100,000 in profit in the first year. After paying 21% corporate income tax, $79,000 of after-tax profits remain. These profits can be distributed as dividends, with the plan receiving 95% of the dividends and individual shareholders subject to individual taxation on the remaining 5%. Alternatively, employing the Unhook strategy, the $79,000 could be utilized to repurchase some of the company stock owned by the BORSA. When a company buys back shares from shareholders, it’s termed treasury stock, reducing the number of shares outstanding and enhancing the value per share of the remaining outstanding shares. Over time, this method allows the C Corporation to repurchase all stock from the retirement plan, effectively restoring their original retirement account balances and reclaiming complete ownership of the company individually. At this juncture, the option within the retirement plan can be to terminate it or transition into a standard 401(k) plan. The business no longer has the 401(k) as a shareholder and is no longer required to be a C Corporation. Converting to an S Corporation or other structure is now an option. This encompasses the Unhook strategy.
In cases where rapid company growth is anticipated, leveraging a buyout may prove advantageous. By borrowing from banks at the corporate level, funds can be used to repurchase stock from the retirement plan at current valuations. Subsequent profits can then be allocated towards repaying the bank, preserving the frozen stock value from the date of the transaction. This constitutes the third exit option: the Leveraged Buyout.
Finally, the fourth option involves utilizing the Net Unrealized Appreciation (NUA) Strategy. Typically, an entrepreneur who has engaged in the ROBS business financing strategy, built a successful and profitable enterprise, and now wishes to exit the strategy aims to defer or reduce taxation on their company shares. If the company stock is valued at more than what an entrepreneur wants to pay to buy it back, there are provisions in the Internal Revenue Code (IRS) permitting tax deferral and capital gains tax treatment when employing certain exit methods from a ROBS Plan. The primary method used is the Net Unrealized Appreciation (NUA) transaction.
When it comes to the NUA transaction, several conditions must be met. These include the ROBS participant being at least 59.5 years old, all other defined contribution accounts (sponsored by the employer) are also distributed, employer securities are distributed in-kind and in the same tax year, among others. Once these conditions are met, a ROBS participant exit can be initiated. The participant will owe only ordinary income tax in the year of distribution on the original rollover value of the shares, as of the date of the original ROBS transaction. Long-term capital gains tax will be due when the shares are ultimately sold.
In the end, the chosen strategy depends on whether individuals seek to maximize value growth within their retirement accounts, maintain a symbiotic relationship between business investment and retirement funds, or capitalize on rapid company expansion through strategic leveraging. Each approach offers distinct advantages tailored to varying financial objectives.
DRDA is the only ROBS/BORSA provider that is uniquely qualified to help navigate the right strategy for you. If you would like to discuss which option is best for you, please call Bryan Uecker at (281) 954-6004 or email bryan.uecker@drdacpa.com.
- Published in ROBS 401(k)
Using Your 401(k) or IRA to Start a Real Estate Business: A Quick Guide
By: Bryan Uecker, QPA, QPFC, AIF, AIFA
Thinking about using your retirement savings to enter the real estate market? Here’s a concise guide on how to leverage your 401(k) or IRA for a real estate operating or property management company.
Why Real Estate?
Real estate is a compelling investment due to its potential for passive income and long-term appreciation. It also provides financial benefits like diversification and tax advantages, including depreciation and deductions.
Can You Use Retirement Funds for Real Estate?
Direct investment in real estate through a traditional 401(k) is not permitted. While self-directed IRAs allow real estate investments, they come with complexities and fees. Direct withdrawals from retirement accounts incur taxes and penalties, reducing your investment capital.
Enter the BORSA: A Tax-Advantaged Solution
BORSA (Business Owners Retirement Savings Account) also called ROBS: (Rollovers for Business Startups) offer a way to use retirement funds without taxes or penalties. Here’s how the BORSA works:
- Start a C Corporation: BORSA requires a C Corp to issue Qualified Employer Securities (QES).
- Start a 401(k): The new C Corp adopts a 401(k) plan.
- Roll Over Funds: Move your retirement funds into the new C Corporation’s 401(k) plan.
- Invest in Real Estate: Use the funds to purchase stock in the C Corp, which then finances your real estate business.
What You Can Start with BORSA
Real Estate Operating Companies (REOCs): Manage and invest in commercial or residential properties.
Property Management Companies: Handle property maintenance and tenant relations for other property owners.
Pros and Cons
Pros:
Diverse Investment: Real estate offers potential for high returns and diversification.
Debt-Free Funding: Avoids debt service and loan complexities.
Cons:
Market Risks: Real estate is affected by local market conditions and economic cycles.
Liquidity Risk: Selling properties can be time-consuming and challenging.
Next Steps
If you’re interested in using BORSA for real estate, consider consulting with a specialist. DRDA can assist with setting up your BORSA, ensuring compliance, and guiding you every step of the way.
- Published in ROBS 401(k)
Understanding the Differences Between DOL and IRS Requirements for Qualified Retirement Plans
By: Bryan Uecker
Navigating the regulatory landscape of qualified retirement plans can be complex for plan sponsors and administrators. The Department of Labor (DOL) and the Internal Revenue Service (IRS) play pivotal roles in overseeing these plans, but they have distinct requirements and regulations. Understanding the differences between the two can help plan sponsors ensure compliance and effectively manage their retirement plans.
DOL Requirements:
The DOL primarily focuses on enforcing the Employee Retirement Income Security Act (ERISA), which sets standards for the operation and administration of retirement plans. Some key DOL requirements for qualified plans include:
1. Reporting and Disclosure: The DOL mandates that plan sponsors provide participants with various disclosures, such as the Summary Plan Description (SPD) and Summary of Material Modifications (SMM). These documents inform participants about their rights, benefits, and obligations under the plan.
2. Fiduciary Responsibilities: Plan fiduciaries have a duty to act prudently and solely in the interest of plan participants and beneficiaries. The DOL oversees fiduciary conduct, ensuring that fiduciaries fulfill their obligations and avoid conflicts of interest.
3. Vesting and Participation: The DOL sets rules regarding vesting schedules and eligibility criteria for plan participation. These regulations aim to protect participants’ rights to their accrued benefits and ensure equitable access to retirement savings opportunities.
IRS Requirements:
While the DOL focuses on ERISA compliance, the IRS administers the tax laws related to qualified retirement plans. Key IRS requirements for these plans include:
1. Plan Qualification: To receive favorable tax treatment, retirement plans must meet specific qualification requirements outlined in the Internal Revenue Code (IRC). These requirements cover various aspects of plan design, such as contribution limits, distribution rules, and nondiscrimination testing.
2. Plan Documentation: The IRS requires plan sponsors to maintain up-to-date plan documents that reflect the terms and conditions of the retirement plan. These documents must comply with IRS regulations and be available for review by plan participants and government agencies.
3. Tax Reporting: Plan sponsors are responsible for filing annual tax returns and informational forms with the IRS, reporting contributions, distributions, and other plan-related activities. Compliance with IRS reporting requirements ensures that the plan maintains its tax-qualified status.
Comparison:
While both the DOL and IRS regulate qualified retirement plans, they have distinct areas of focus and enforcement authority. The DOL emphasizes participant protection, fiduciary oversight, and transparency through disclosure requirements. In contrast, the IRS focuses on tax qualification, plan documentation, and compliance with tax laws to maintain the plan’s favorable tax status.
Conclusion:
Understanding the differences between DOL and IRS requirements is essential for plan sponsors and administrators tasked with managing qualified retirement plans. By adhering to both sets of regulations, sponsors can ensure compliance, protect participants’ interests, and maintain the tax-qualified status of their plans. Staying informed about evolving regulations from both agencies is key to successfully navigating the complex landscape of retirement plan administration.
- Published in ROBS 401(k), ROBS 401k Provider, Small Business, Starting a Business
Comparing Self-Directed IRAs vs. BORSA/ROBS
By: Bryan Uecker, QPA, QPFC, AIF, AIFA
Self-directed IRAs and BORSA/ROBS (Rollovers for Business Start-ups) offer distinct approaches to investing in businesses:
Business Involvement
BORSA/ROBS: Requires active participation in business operations, including receiving a salary if deemed reasonable. Structured through a C corporation, which is the sponsor of the retirement plan.
Self-directed IRAs: Passive investment vehicles where IRA owners cannot engage in business management or take salaries. Doing so could violate IRS rules on prohibited transactions.
Tax Considerations
BORSA/ROBS: Subject to regular corporate taxes; UBIT (Unrelated Business Income Tax) does not apply since the C corporation is taxable.
Self-directed IRAs: Income from business activities may trigger UBIT if unrelated to the IRA’s tax-exempt purpose.
Loan Guarantees
BORSA/ROBS: Allows funds to be used as a down payment for business loans, including SBA loans.
Self-directed IRAs: Cannot guarantee loans, maintaining separation between IRA assets and personal liabilities.
Ownership Flexibility
BORSA/ROBS: Enables up to 100% ownership of the business, providing full control.
Self-directed IRAs: Direct ownership risks violating IRA rules if exceeding certain ownership thresholds, jeopardizing tax benefits.
Conclusion: Self-directed IRAs are ideal for passive investors seeking hands-off involvement, while ROBS empowers owners with direct control and tax advantages through a C corporation setup.
- Published in ROBS 401(k), ROBS 401k Provider, Small Business, Starting a Business
