A Short ROBS History

it back, relax, enjoy your coffee, and settle in for a short ROBS history story. Leonard Fischer, an ERISA attorney and founder of Benetrends, first offered a ROBS platform in 1983. Benetrends remains an industry leader. SD Cooper offered a ROBS arrangement in 1999 using an ERSOP profit sharing plan. Guidant entered the field in 2003, becoming the Henry Ford of the industry in their assembly line approach that jetted them to the top of the industry. Other companies started creating ROBS plans and, honestly, some of them either did not know what they were doing or did not care.

Understanding History is the key
o not repeating its mistakes

Each promoter had their own name and nuance for this concept, which the IRS started calling “ROBS” in 2008. The IRS did not go after ROBS clients, but promoters, at least two of whom decided to leave the industry. The three concept leaders, named above, grew stronger during the ROBS project as their programs were already in line with IRS guidelines. Several other companies, such as IRA Angel Funding,   started after the IRS’ ROBS project concluded. Today, consumers have several good companies to choose from when launching a corporation with ROBS funding.

ROBS Concept Receives a Black Eye

I first became acquainted with Adam Bergman’s writings in 2008 when he was the first person, to my knowledge, who associated the ROBS acronym with the idea that the IRS used this name because the concept robs someones retirement plan. I discovered that Bergman owns a firm that helps people create solo 401k plans and self-directed IRAs. The ROBS industry took clients away from him. My guess is he decided to discredit the movement rather than add ROBS packages to his portfolio of options. This is only a guess, as he may have analyzed ROBS issues extensively and formed an opinion of a concept fraught with peril. While I often grant people I do not know the benefit of the doubt, I am not so inclined with Bergman because his articles are not written from an objective viewpoint. For example, this article he wrote for Forbes in 2015.

His article title itself suggests that the IRS deems a rollover business startup as robbing one’s retirement plan thus inviting IRS scrutiny. He then walks readers through the IRS 2008 ROBS memo in a style that reinforces his idea that adopting a ROBS plan is fraught with audit peril. While none of his points are legally incorrect, his assertions do not tell the full story.

The Rest of the Story

Are you opening yourself up to an audit when you adopt a ROBS setup? Perhaps. However what kind of audit? What is the IRS most interested in? Is the IRS 2008 memo the place to go to look for this information. I recommend that, for the rest of the story, you read the final summary the IRS published in 2013. Does the IRS actually consider your investment through your 401k plan into your corporation as robbing your plan? No. Their issue? Not filing proper 5500s for the plan. A tax form. Who would guess the IRS would be concerned about paperwork?

That is a short ROBS History.

If you want to create a ROBS arrangement, call me before you call a promoter. I can save you thousands of dollars and help you create a fully compliant program.

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