Some Common ERPA Questions

1) How quickly can employer securities held in a plan be purchased back from the plan?
2) How long must a retirement plan be in place before being terminated?
It’s important to note that the existence of a plan and the investments it holds are separate issues.
The IRS’s view is that a retirement plan is meant to be permanent. This doesn’t mean that once in place the plan cannot be terminated. It means that the employer must be able to demonstrate an intent for it to be permanent. This is best accomplished by the passage of time. There is nothing in the regulations which dictates specifically how long a plan must be in place before being terminated to demonstrate that it was initially intended to be permanent. Facts and circumstances are used to assess permanency but in practice a plan being in place at least 3 to 5 years before a decision is made to terminate, is generally an indication of permanency. Obviously the longer a plan is in place the better.
So, to answer the question of how quickly can employer securities held in a plan be purchased back from the plan, the answer is employer securities are just an investment. The investment can be sold at anytime. Thus, there is no time requirement for employer securities to be held before being sold.
Just keep in mind that the plan needs to be kept in place long enough to meet the permanency test.  When you are ready to discuss how ERPA can work with your business purchase needs then you are welcome to contact us here.

Pay Attention To The Rules When Making Contributions

Contribution posting requirements state that all contributions must be deposited to the participant accounts by the end of the 7th business day after the date on their paychecks. In order to facilitate this, we advise that contributions be posted on the same day as the payroll date.

If that’s not possible, then they should be posted no later than the 3rd business day after the pay-roll date. History shows that this allows enough time for Aspire to place and settle the trades within the 7 business day window.

The Department of Labor takes the view that delays in depositing contributions to trust constitute a breach of fiduciary duty and a prohibited transaction. With penalties for fiduciary breaches of 20% and a 15% prohibited transaction excise tax, every employer should be motivated to make deposits timely.

When posting employee contributions, please make sure that you are posting them to the correct source type. You could have Employee Deferral (pre-tax) or Employee ROTH (after-tax) depending on what your employees have selected on the enrollment form. You could even have an employee that has chosen to contribute an amount to both types. So just double check before you submit your transactions by clicking the Print button and reviewing the report that generates. This could save time and money down the road since our book-keeper, Aspire, charges a fee for data entry  corrections.

Trustees And Fiduciaries

All business owners and executives have the obligation and duty to their employees, shareholders, partners and families to insulate and protect their companies and operations from the legal threats that haunt businesses. By understanding the threats and risks, and by taking proactive measures to prevent lawsuits and legal disasters, you can control your own legal destiny and win the advantage in any future legal battles.

In the world of 401(k)s and other qualified plans, the Trustees and Fiduciaries assume those roles and have the same obligations and duties as do owners and executives in the corporate world. Walker Advisory insulates and protects the business owners from exposure to the long arms of the IRS and DOL (Dept. of Labor). We assume all responsibility and liability so that the business owner can focus on building his business and not have to be constantly looking over his shoulder.

If you need help on getting started to use your qualified retirement plan to purchase a business then you are welcome to contact us here.

Know About Borrowing From Your 401 (k)

Loans are typically the least damaging way to access your retirement savings early, because the money is typically repaid with interest and isn’t taxable. Most 401(k) participants are permitted to borrow as much as 50 percent of their 401(k) account balance up to $50,000. The loan typically must be paid back within 5 years. “Most borrowers continue to contribute to the plan while they have a loan, and most of the money is repaid,” according to the Center for Retirement Research report. “The likely point of default arises when a terminating employee cannot repay the loan within 60 days, causing the money to be treated as a taxable distribution and subject to penalties.”

These loans typically have origination, administration and maintenance fees, and if you lose or leave your job, the loan suddenly becomes due. Loans that aren’t repaid on time are considered distributions and become subject to income tax and, for people under age 59½, the early withdrawal penalty.

One final note…….I would like to welcome Doug Smith to the Walker Business Advisory family. He is a welcome addition.
If you are interested in learning about using your 401(k) to buy a business then you are welcome to start here.  Once you understand the basics then watch the helpful video explaining the big picture of ERPA and how we can help you purchase the business you are considering by going to this page.

Retirement Plan Success Follows Strong Plan Compliance

This post is granted to this website to be used with permission by Fred Whitlock and Walker Business Advisory Services.

If you are ready to discover more about how you can use your retirement plan to purchase a business, stay compliant with federal regulations, and have more protection & flexibility than other consulting options you are considering then you are welcome to contact us.

Have you ever bitten or cut into an apple only to find a worm inside? That wonderful looking piece of fruit all of a sudden becomes much less appealing. Depending on the extent of the damage caused by the worm, none of the apple may be salvageable.


In a retirement plan, compliance failures, just like the worm, can fester without being detected. The retirement plan appears to be functioning well but in reality significant problems are building. Then one day the Department of Labor or the Internal Revenue Service make an inquiry, and just like the opening of an apple, the compliance problems get exposed.


Although the best way to handle compliance issues is to address them before they begin, the reality is problems do occur. Retirement plan success requires strong plan administration designed to detect and correct compliance issues. The Entrepreneur Retirement Plan of America (“ERPA”) is such a plan.


One of ERPA’s many compliance procedures includes the review of each adopting employer’s federal income tax return. This review process has identified that around 95% of the tax returns filed initially after ERPA is adopted contain some form of error requiring a correction. Some of the errors are critical elevating to the level of a prohibited transaction. For example, when a retirement plan invests in employer stock a C corporation is required. This past year ERPA’s tax return review process identified several corporations which had made an S-Election thus converting the C corporation to an S corporation. Because of ERPA’s detect and correct approach, these S corporation issues were quickly addressed and resolved. But, had they gone on undetected for a long period of time, like having a worm in an apple, the results would have been catastrophic to the respective businesses and possibly to the lending institutions as well.


ERPA’s compliance procedures are unmatched. These procedures help insulate entrepreneurs from the long arms of the Department of Labor and the Internal Revenue Service. Lenders’ loans issued to ERPA businesses have greater security due to ERPAs compliance features because these features keep ERPA businesses compliant.

ERPA’s detect and correct compliance approach equals plan success.

Courtesy of:  Frederick S. Whitlock