Rollover as Business Start-Up (ROBS) Plans

Sophisticated Legal Guidance for a Highly Specialized Retirement Plan Strategy

A Rollover as Business Start-Up (ROBS) arrangement allows a prospective business owner to use funds from a tax-qualified retirement account to finance a new business or acquisition without triggering current income tax or early withdrawal penalties. Done correctly, a ROBS plan can be a powerful financing tool. Done incorrectly, it can expose the plan sponsor, the business, and the individual’s retirement savings to serious tax penalties, plan disqualification, and personal financial loss.

The IRS has specifically flagged ROBS arrangements for compliance scrutiny, and the rules governing plan qualification, prohibited transactions, valuation, and ongoing administration are unforgiving of missteps. The Wagner Law Group has decades of combined experience in ERISA, employee benefits, and executive compensation law, and we bring that depth of knowledge to every stage of a ROBS engagement — from initial structuring through ongoing plan maintenance and, when necessary, IRS or DOL correction programs.

How We Help

Our attorneys advise entrepreneurs, plan sponsors, franchisors, and ROBS providers on the full range of legal issues that arise in connection with these arrangements, including:

• Plan Design and Formation – Structuring the C corporation and qualified retirement plan required for a ROBS arrangement, and ensuring the plan document satisfies IRS qualification requirements from day one.
• Plan Document Drafting and Amendments – Drafting and maintaining individually designed plan documents, as well as reviewing pre-approved and third-party provider documents, including review under our Private Determination Letter Program (PDLP).
• Prohibited Transaction Analysis – Evaluating the stock purchase, valuation, and funding structure of a proposed ROBS transaction to identify and avoid prohibited transactions under ERISA and the Internal Revenue Code.
• Coverage, Discrimination, and Benefits, Rights & Features Compliance – Advising on the nondiscrimination and coverage requirements that come into play once a ROBS company begins hiring non-highly compensated employees.
• Tax Consequences – Advising employers and individuals on the income and excise tax implications of ROBS transactions, including issues related to excess contributions and unrelated business taxable income.
• Valuation Issues – Counseling on the stock valuation questions that frequently arise when a plan purchases newly issued employer stock, an area the IRS has identified as a common point of failure.
• Ongoing Plan Administration – Guiding sponsors through the annual administrative, reporting, and disclosure obligations that apply to a ROBS plan.
• Correction and Compliance Programs – Representing clients in voluntary IRS and DOL correction programs to address operational or document failures, reporting and disclosure lapses, or fiduciary breaches identified in an existing ROBS arrangement.
• IRS and DOL Examinations – Guiding clients through IRS compliance checks and examinations specific to ROBS plans, including responding to inquiries arising from the IRS’s ongoing ROBS compliance initiative.
• Exit and Restructuring – Advising on the unwind, sale, or restructuring of a ROBS arrangement, including the tax and plan-qualification consequences of terminating the structure.

Why the Details Matter

ROBS arrangements sit at the intersection of ERISA, tax law, and corporate law, and the IRS has made clear that it views the space as high-risk. Common pitfalls we help clients avoid or correct include:

• Plan amendments that improperly restrict employer stock purchases to a single participant
• Overpayment for employer stock due to inadequate or unsupported valuations
• Failure to pay a reasonable salary once the business is operational
• Coverage and nondiscrimination violations that arise as a company grows and hires employees
• Inadequate plan documentation, recordkeeping, or annual filings

Because these issues often surface years after a ROBS plan is established, we work with clients both at formation and throughout the life of the plan to keep the arrangement compliant and defensible.

Who We Work With

• Individuals considering a ROBS strategy to fund a new business, acquisition, or franchise
• Existing ROBS plan sponsors seeking a compliance review or correction of prior errors
• ROBS facilitators and providers seeking outside legal counsel and document review
• Accountants, financial advisors, and business brokers whose clients are evaluating a ROBS transaction

Work With Us

Given the complexity and IRS scrutiny surrounding ROBS arrangements, sound legal advice at every stage, from initial plan design through ongoing compliance, is essential to protecting both the business and the retirement assets behind it. Contact The Wagner Law Group at (NAP BOSTON Local) to discuss your ROBS plan or a proposed transaction with one of our experienced attorneys.