Marijuana Dispensary

[austin3515]

Anyone seen a write-up about how a 401k plan for these things would work?  Are there any special caveats to be aware?

 

[QDROphile]

With the goblin lawn ornament as Attorney General and the prevaricating pumpkin as President you cannot predict what will happen with tax treatment of a business whose very existence is a violation of federal law.  It might help to get an update update on how these businesses faring with banks.  There was a time that banking within the fed system and federally chartered banks was a problem, forcing the businesses into cash.  I have not kept touch with progress or resolution.

[MoJo]

39 minutes ago, austin3515 said:

Anyone seen a write-up about how a 401k plan for these things would work?  Are there any special caveats to be aware?

 

Um, we (politely) decline.  While legal under "state law" in some places, they are still illegal under federal law - and therefore it is illegal for a (federally regulated) financial services provider to do business with them - and a state regulated financial services company - if your "state" isn't one of them that has legalized the "business."  That's why they have trouble opening bank accounts, which could mean they have trouble paying their bills - including yours....

It will be interesting to see this play out.  We are conservative enough that we'll take a wait and see attitude to see how it shakes outs.

Just to put my two cents in - it's amazing that a certain segment of our political sphere screams about "states rights" and using the states to "experiment" and giving them the flexibility to do so, and then to ignore all of that on a perceived "moral" issue....

[My 2 cents]

57 minutes ago, MoJo said:

Just to put my two cents in - it's amazing that a certain segment of our political sphere screams about "states rights" and using the states to "experiment" and giving them the flexibility to do so, and then to ignore all of that on a perceived "moral" issue....

...Taking what many may perceive (in the case of medically necessary usage, in particular) as the wrong side of the question as to what is and what is not moral?

PS:  No relation (that I know of) between MoJo and me!

[MoJo]

4 minutes ago, My 2 cents said:

...Taking what many may perceive (in the case of medically necessary usage, in particular) as the wrong side of the question as to what is and what is not moral?

PS:  No relation (that I know of) between MoJo and me!

By definition, what is, and is not, moral is dependent on which side of the issue you are on....  I'm going to say it - especially in the context of "medically necessary usage" - "pro-life" apparently does not mean "pro-quality of-life"....

[ESOP Guy]

1 hour ago, MoJo said:

Just to put my two cents in - it's amazing that a certain segment of our political sphere screams about "states rights" and using the states to "experiment" and giving them the flexibility to do so, and then to ignore all of that on a perceived "moral" issue....

And by moral issue you mean actually expecting people to follow the law?  Which I would add is a conservative value.  One of the biggest fallacies in political conversations comes in ridiculous claims of hypocrisy.  This is a classic example.  A person takes just one value of the other side acts like that is their only value that has anything to say on the topic and runs with it.

Like I pointed out conservatives  believe that the law ought to be obeyed and you seem to think the AG ought to just ignore the acts of congress based on an idea of federalism- sorry there at a minimum there needs to be a balancing that needs to happen.  Sure the AG could abuse the idea of prosecutorial discretion like what happened with Obama and the Dreamers but one can't help but think the same liberals who liked that idea would oppose a GOP AG saying he is using proecutorial discretion to stop enforcing all federal gun laws.  They would rightfully be pointing out that is the executive branch not merely using executive discretion but simply in effect making new law without engaging the other branches of government.  Which would be an abuse of power. 

You in fact would find there are plenty of people on the right that would have no problem with congress engaging in federalism when it comes to pot policy but the power to do that is in congress not the AG acting alone. 

I would add the whole framing of it as simply a moral issue is a strawman.  The pro-pot legalization side does in fact down play the extensive health issues that comes with pot and its legalization.  So there are in fact valid safety issues and not merely "moral" issues. 

[ESOP Guy]

48 minutes ago, MoJo said:

 "pro-life" apparently does not mean "pro-quality of-life"....

And why should it?  The pro-life position is the taking of an innocent human life is wrong and has been the moral and legal position of humanity for a long time.  In all the cases where this issue comes up we have an innocent human life.  Therefore, the same protections are due those lives.  It is far from obvious quality of life issues ought to justify taking another person's life. Even with end of life issues there is clearly a huge moral and legal difference between suicide and euthanasia. 

[austin3515]

Let's keep it focused on 401k plans here gentleman!

[MoJo]

18 minutes ago, ESOP Guy said:

And by moral issue you mean actually expecting people to follow the law?  Which I would add is a conservative value.  One of the biggest fallacies in political conversations comes in ridiculous claims of hypocrisy.  This is a classic example.  A person takes just one value of the other side acts like that is their only value that has anything to say on the topic and runs with it.

Like I pointed out conservatives  believe that the law ought to be obeyed and you seem to think the AG ought to just ignore the acts of congress based on an idea of federalism- sorry there at a minimum there needs to be a balancing that needs to happen.  Sure the AG could abuse the idea of prosecutorial discretion like what happened with Obama and the Dreamers but one can't help but think the same liberals who liked that idea would oppose a GOP AG saying he is using proecutorial discretion to stop enforcing all federal gun laws.  They would rightfully be pointing out that is the executive branch not merely using executive discretion but simply in effect making new law without engaging the other branches of government.  Which would be an abuse of power. 

You in fact would find there are plenty of people on the right that would have no problem with congress engaging in federalism when it comes to pot policy but the power to do that is in congress not the AG acting alone. 

I would add the whole framing of it as simply a moral issue is a strawman.  The pro-pot legalization side does in fact down play the extensive health issues that comes with pot and its legalization.  So there are in fact valid safety issues and not merely "moral" issues. 

The hypocrisy comes in determining what should, and should not be the subject of "federal" law, - while voicing at the top of their lungs that very little should be subject to federal oversight.  Laws are based on "values" but they tend to reflect the values of the time at the point in time they are enacted.  Various drug laws were based on the knowledge and the understanding as it existed in the past.  Both science and values change - and laws should be revisited when that occurs.  Case in point - LSD.  Legal until the early/mid '60s, until science determined that long term consequences from continued use required some legislative changes.  The flip side is marijuana - which was lumped in with other substances as not legal -  but then science determined their was therapeutic value to the substance in some circumstances.  Doubt that?  Go watch "Reefer Madness" and discern how much of it is consistent with current scientific and/or medical thought.  Not much....

The question here is not one of whether to comply with the "law" but rather comply with "which law" and whether current (federal) law is actually the "right" law - and that is more than one person's decision (like the AG's) based on their own preconceived notion of right and wrong.  The "history" of this country, and one of it's founding "values" is constructive defiance of the law to precipitate change.

You think dumping a cargo ship's load of tea in the Charles River was "law abiding"?

And heeding Austin's admonition, in this case - the differences in laws and the inconsistency DOES impact the 401(k) world - in that my employer - as a financial services company, we can't under federal law, we have concerns of what the consequences are if we were to do business with such entities - and yet, what we do (401(k) plans and related stuff) is not impacted by the employer's business.  Couple that with various state laws that prohibit to much selectivity in the provision of services, and we get caught between a rock and a hard place.

[CuseFan]

This sounds more like it should be a Friday afternoon friendly discussion over a couple of beers or joints (depending on which state you live in and which side of the argument you fall) rather than a middle of the week heated philosophical debate. Take my word for it, it's more fun my way!

[Mike Preston]

Well, its Friday afternoon.

[JRN]

Let's see if I can gently steer this discussion back to the original post. Seems to me that the main issue is whether the employer is able to open a bank account. I'd ask the employer "how do you pay your employees?" If the employer has a bank account and pays its employees with checks (not cash), then I think setting up a 401(k) plan should be pretty straight-forward. The 401(k) contributions can be remitted from that same bank account. But, if it's a "cash-only" business, I think there would be practical problems with setting up a 401(k) plan. 

Any other thoughts out there?

[MoJo]

2 hours ago, JRN said:

Let's see if I can gently steer this discussion back to the original post. Seems to me that the main issue is whether the employer is able to open a bank account. I'd ask the employer "how do you pay your employees?" If the employer has a bank account and pays its employees with checks (not cash), then I think setting up a 401(k) plan should be pretty straight-forward. The 401(k) contributions can be remitted from that same bank account. But, if it's a "cash-only" business, I think there would be practical problems with setting up a 401(k) plan. 

Any other thoughts out there?

Having a bank gets you part way there.  Finding a service provider is the rest of the equation.  As I indicated above, we "politely" decline to bid on such business.  We aren't sure what the regulatory issues are to us as a financial service provider, and therefore take a pass.

[ESOP Guy]

In the other thread on the pot topic I mentioned this but don't see it here. 

Review IRC 280E:  https://www.law.cornell.edu/uscode/text/26/280E

Many expenses of operating a drug business aren't deductible so even if you get a 401(k) set up how does all of that work?  Maybe it doesn't matter I have never looked into it.  But a PS cont could easily be paid with after-tax dollars so do you have a basis in the PSP or does the person have to pay taxed again when they take a distribution?  If it gets taxes twice it might not be worth it to the owners- maybe even the employees.  They might as well as get an IRA and invest after-tax after that. 

[stephen]

I am checking in to see if anything changed on this front since last year?

I am not aware of any changes but am checking in anyway.

[Peter Gulia]

I heard (but have not checked) that Empower Retirement / Great-West Life & Annuity Insurance Company is willing to serve some marijuana businesses.

 

[RatherBeGolfing]

7 minutes ago, Fiduciary Guidance Counsel said:

I heard (but have not checked) that Empower Retirement / Great-West Life & Annuity Insurance Company is willing to serve some marijuana businesses.

 

Really?  Is this recent?

The reason I ask because a bunch of us (including someone from Colorado :)) discussed this at last years ASPPA Annual.  The question was then put to the full panel of "ask the experts", which included Sal, Ilene, and a few others.  At that point, none of the major recordkeepers were willing to play along.  Ilene also pointed out that it would be hard to find an attorney or TPA to service the plan because any fees collected could be seized by the feds at any point.

Just curious if you know of any recent changes.

[Peter Gulia]

Four years ago, a postdoctoral student in my course on Professional Conduct in Tax Practice chose for his semester paper to write about whether it’s feasible for a lawyer or a certified public accountant (he is both) to render advice to a marijuana business.  Many associations’ opinions say it doesn’t break the profession’s conduct rules merely to render advice.  But those opinions disclaim considering anything beyond the professional-conduct rules.  Challenges under other law—including crimes of aiding another’s crime or engaging in a monetary transaction that involves proceeds of a crime, and risks of forfeitures (which might undo a fee)—have scared off many professionals.  Even a client’s engagement of a professional might be vulnerable to an argument that the agreement is not a legally enforceable contract.

 

What I heard about Empower was last month.  But I’m not aware of anyone checking on it.  A roomful of practitioners, mostly TPAs, said they wouldn’t accept a marijuana business, even for work strictly limited to a retirement plan.

 

If anyone wants Empower’s answer, perhaps it’s straightforward to call there and ask.

[RatherBeGolfing]

Thanks Peter.  

Great-West makes sense to me because its based in Canada, so I don't doubt that they would take on a business that is legal in Canada.  I think that Empower falls under GWs US subsidiary, but maybe they want to be the first big RK to wade into these waters now that Sessions is no longer AG (since Sessions was seen by many as one of the bigger federal speed bumps). 

 

[austin3515]

RBG, are you sure you're not thinking of John Hancock?  I didn't think Empower was Canadian, but I know JH is.

[RatherBeGolfing]

50 minutes ago, austin3515 said:

RBG, are you sure you're not thinking of John Hancock?  I didn't think Empower was Canadian, but I know JH is.

Well, Empower isn't really Canadian.

Great-West Lifeco is Canadian. Great-West Lifeco US is their US subsidiary.  Great-West Life & Annuity falls under Great-West Lifeco US.  Empower falls under Great-West Life & Annuity as a wholly owned subsidiary of Great-West Lifeco.

So since it is would be a legal operation in Canada, I can see why Great-West wouldn't have a problem with it.  I don't know if their US subsidiary would be though.  Empower falls under the US subsidiary, but the parent company is Canadian.

Our discussion at ASPPA Annual was based on using JH since its "Canadian", but its not directly Canadian either.  JH is the US subsidiary of Manulife Financials, which is Canadian.

Im sure I skipped tons of steps in the corporate structures of moth GW and Manulife, but this is sort of the birds eye view as I understand it.  

[austin3515]

Jeeze, I've been working with them for 10 years and I had no idea they were a Canadian company.  (just to clarify - not that there's anything wrong with that :)).

https://en.wikipedia.org/wiki/The_Great-West_Life_Assurance_Company 

[RatherBeGolfing]

FYI for everyone following this topic:

I reached out, and Empower Retirement will NOT take on this type of business at this time.  To many concerns in regards to how many comes in and goes out.  I'm not aware of any major RK who will take it on.

[Bill Presson]

My friend, Kirsten Curry with Leading Retirement Solutions, announced this earlier this week:

https://www.seattlechamber.com/HOME/membership/member-news/detail/new-cannabis-401(k)-plan-levels-the-playing-field-for-cannabis-companies

[RatherBeGolfing]

11 minutes ago, Bill Presson said:

My friend, Kirsten Curry with Leading Retirement Solutions, announced this earlier this week:

https://www.seattlechamber.com/HOME/membership/member-news/detail/new-cannabis-401(k)-plan-levels-the-playing-field-for-cannabis-companies

Cool.  Will be interesting to find out more for sure.  The announcement didn't really  go into if they feel they have figured out a way around the risk of forfeiture and money laundering issues that have been a concern, or if they have simply decided to do it because they feel they are on solid legal footing and are willing to be a test case if the feds come after assets or proceeds.