This ROBS History is the 2nd of a three part series on the differences between the Frank Selden Law, PS approach to creating a ROBS versus the ROBS promoter approach. The first is available here.
The ROBS Promoter Concept
In a nutshell, the ROBS promoter concept is a one-stop shop of a two-part process: the ROBS concept creation and ongoing 401K plan administration. A ROBS promoter typically charges around $5,000 for the setup and $1,000 + per year for plan administration. The setup between promoters is nearly identical now because of the IRS involvement. Some differences in the way they create corporate minutes, but overall the concept is the same. The ROBS promoter might offer discounts, especially if you are not coming to them through one of the numerous channels with whom they share fees. If that is the case, they simply deduct the fee they would have paid to their referral partner.
Many ROBS clients will notice more significant differences in the ongoing plan administration. Plan administration, not concept setup, is where people get into trouble.
Here is one example. Most ROBS promoter concepts make YOU, the client, the trustee of the plan. You are responsible to open bank or brokerage accounts in the name of the plan. You initially handle plan funds. Most people do not want to be plan trustees but the ROBS concept gives them no choice, until now.
I helped numerous clients fix issues created by this concept. They deposited plan funds in the corporate account by mistake, or used the plan account to pay company bills. They had trouble finding an investment company to accept a private 401K plan account which that investment company did not create and allowed investments into restricted securities, an issue which will grow under the new fiduciary guidelines for retirement funds effective July 2017.
While some promoters call the plan admin part of their program a “third party administrator” (TPA), the reality is that they are little more than plan record-keepers, not true TPAs. You, their client, are responsible for providing them the plan financial information for the 5500 filing and you handle the plan funds.
Enter Frank Selden Law, PS
For most of my experience with the ROBS industry I legally represented clients undertaking or having problems with a ROBS funded corporation. I accepted clients from, and became familiar with the products of, most of the ROBS promoters. I did not expand into creating the entire ROBS concept because I had no interest in starting a plan admin service. Fortunately, I found a true TPA who handles 401K plans that contain qualified employer securities. An ERISA attorney started that TPA specifically for ROBS clients unhappy with their promoter admin services.
This TPA does not create ROBS concepts for people. They do, however, offer what I believe is the best TPA service for your ROBS company. They design and write your 401K plan specifically for your corporation. They have an investment platform that allows employees, including you, to invest into mutual funds through the Mid-Atlantic Financial. When I first learned about their company at a 401K plan administration conference, I knew immediately that my clients needed this solution.
I now work with them to create the best ROBS concept available. Frank Selden Law, PS creates your ROBS concept as a legal service. The TPA creates and administers your plan. We do not create or administer your plan, and they do not act as your attorney. We do not share fees with them, and do not receive any compensation for referring you to their company. By the way, if you have a TPA you prefer to use, I will work with them instead. You are not required to use that TPA in order to use my ROBS creation services, but you are required to have a TPA.