I just completed a phone call with a business intermediary and one of the items we discussed was the use of retirement monies as a source of business capital. Specifically, we discussed our plan, the Entrepreneur Retirement Plan of America (ERPA) compared to plans provided by other service providers.
A significant part of the discussion centered on the cost of ERPA versus the plan provided by other groups. I can state with confidence that upon evaluating the total ALL-IN costs to implement and maintain ERPA versus the other groups, ERPA’s ALL-IN cost is lower and the client’s exposure is significantly less because we assume all plan responsibility by serving as the plan’s ERISA 3(21) Trustee and Fiduciary and the ERISA 3(16) Plan Administrator.
A specific item of discussion dealt with the issue of business valuations which was discussed in a previous email. A fully compliant business valuation is specifically required by ERISA which is enforced by the Department of Labor (DOL), the IRC and the Internal Revenue Service (IRS). They noted that and I quote:
“Stock is exchanged without any real attempt to determine its value. The Stock is said to be equal in value to whatever happens to be available to exchange for it which creates a prohibited transaction.”
Walker Advisory requires that a fully compliant business valuation be prepared as we know this to be a regulatory requirement. It protects the client. If the client has a business valuation report as a part of a loan then we simply get a copy for our file at NO COST to the client. If the client is not required to procure a business valuation for other purposes, such as a loan, then the client is required through us to have a business valuation prepared and if it is a start up then a business calculation is required by us. The cost for this report is based on the business valuator who will produce a fully compliant IRS, DOL valuation/calculation.
Since we assume the Trustee, Fiduciary and Plan Administration responsibilities, the IRS and DOL look directly to us in the event a compliance matter arises with the plan. Thus, we are bound by regulation to support, represent and defend our clients which is significantly greater than any form of guarantee such as the guarantee offered by others.
Be sure to take a moment and read our articles about which qualified retirement plans can work with the Plan.
When you are ready, be sure to contact us to discuss your specific retirement plan and the business you which to purchase.