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Based on an exemption in ERISA law, new business owners can get penalty-free access to their retirement funds to buy or start up a new business.

Our pension actuaries have designed a multiple-employer trust plan that couples a 501(a) tax-deferred trust to an retirement plan that includes special pro rata, new-comparability and safe harbor features.

By transferring retirement funds from your current custodian (Fidelity, Schwab, Merrill Lynch et al) to your new custodial account (at Bank of America and Transamerica Corp), you will be switching retirement investments from mutual funds to what the IRS terms “qualifying employer securities”, basically privately-held stock in your own business.

And by setting up the trust plan to buy stock in your new business, you are substituting one type of asset for another. Since no “distribution” takes place, no taxable event has been created. No distribution, no taxes due.

For years, benefits plan consultants have coupled amended regional prototype 401(k) plans with 501(a) trusts. We call this a Pension Transfer Trust. When designed in accordance with ERISA Sections 407(b)(1), 408(e) and as a statutory exemption to the prohibited transactions rules under IIRS Code Section 4975, taxpayers are allowed to rollover funds from qualified plans into a trust that can then purchase privately-held stock in their own business. The new plan can receive direct transfers from any of the following pension and retirement plans: 40l(k), 403(b), 457, rollover IRAs, SEP IRAs, and profit-sharing plans.

Our firm created this particular tax strategy under existing statutory exemptions in the IRS Tax Code. A number of sophisticated components are needed to couple to the basic plan and trust. With the help our pension advisors and fiduciaries, we have assembled this turn key package of products and services so clients don’t have to search the country for sources and pay more expensive fees to other professionals.

If you are planning to buy or start up a new business and need cash for the down payment, or additional operating money, and if you have funds in a retirement account, there is a way, in accordance with codified law to transfer this money into your new business account without triggering a taxable event.

(With this procedure, you can save 40% to 48% in taxes and early distribution penalties. And use this savings for additional operating capital. (Let the government help finance your new business.)

The Law

Since 1974, there has been a statutory exemption in the law that allows taxpayers to use 401k money to purchase stock in their own business. It is found in Sections 407(b) and 408(e) of The ERISA Act. And under the “prohibited transaction” rules in IRS Code Section 4975d(13) as an exception that allows a plan to purchase “qualifying employer securities.”

A Trust

With the adoption of a Pension Transfer Trust Plan you are able to convert existing retirement investments into privately-held stock in your new business. The tax-deferred 501(a) trust is coupled to a replacement plan that contains special “exemptive clauses.” Your new business gets the cash it needs from the sale of a portion of its stock to your trust plan. The trust plan is unique in that it will provide custodial services to administer non-publicly-traded stock.

The Procedures

To insure that ERISA and IRS code sections applicable to this exemption have been complied with, we provide all of the components required. Because no “rollover” takes place, merely a “custodian-to-custodian transfer, the qualified funds remain sheltered from taxes by provisions of IRS code section 501(a). Since no distribution takes place, there is no taxable event. Legally, retirement plan assets are not being used to run the business, rather, cash proceeds from the sale of stock from the business to the plan are used. Therefore, the plan owns the “assets”, the shares in the business.

Note

Because The Pension Transfer Trust is not found on an idea or concept, but rather within codified law, any legal counsel that reviews applicable ERISA and IRS code sections will find this to be a solid tax strategy.

An example

If a new business buyer has $100,000 in a 401(k) or IRA account and takes an early distribution, the following taxable events would be triggered: a 20% mandatory hold-back, Federal (and state) income taxes (at higher tax rates) and a 10% early withdrawal penalty. This could easily be a $45,000 tax bite.

With a pension transfer trust plan in place, the buyer can get the down payment for his new business and keep the $45,000 check to the IRS as a cushion for additional operating money.

The Components Required

So you don’t have to search the country to find the right professionals, and pay exorbitant fees for their services, we provide all of the components required by law in one turn-key package. And, to make this procedure painless, we take each step for you in your behalf as we walk you through the process. All costs are included in your initial fee.

To meet the conditions required by law to establish a pension liquidity trust, we provide all of the needed components in behalf of our clients:

· A 501(a) trust coupled to a pension replacement plan

· A corporate charter and Articles of incorporation

· A custodian to receive closely-held stock

· A trustee to administer the trust plan.

· A staff of professional specialists: an Independent Fiduciary, an ERISA Tax Attorney, and a Transaction CPA

All of the legal documents to support these procedures: a complete set of trust plan docs, stock subscription agreements, a favorable Letter of Determination from the IRS, a fair market value appraisal, and an ERISA fidelity bond.

The Basic Procedure

1. First, we form a small, closely-held family corporation in your behalf, to provide the vehicle required by law for tax-free transfers.

2. This closely-held corporation then adopts a pension transfer trust plan. This replacement plan makes it possible to take possession of 100% of your existing retirement funds without creating a taxable event. And it becomes the sponsor for your future tax-deferred investments. (The plan contains special exemption clauses and is coupled to a 501(a) tax-deferred trust.)

3. We provide you with a trust account.

4. A corporate bank account is opened with the a Charter, By-laws, and Federal ID number.

5. The trust replaces your old plan.

6. Funds are then transferred from your existing custodian to your new trust plan.

7. Since you new trust replaces your old plan, funds are transferred without taking distribution, therefore no taxable event occurs (so no taxes would be due).

8. The cash in the trust is used to purchase a portion of the stock in your new business.

9. The corporation then deposits the cash that it received from the trust, into its new bank account.

Your new business is now cash rich and debt-free, looking for a business to buy.