What Is a ROBS Plan and How Does It Work for Business Owners?

KLB Benefits Law Group

“ROBS” stands for Rollover for Business Startup, which describes a special kind of investment inside an otherwise normal defined contribution retirement plan. By making the employer stock available as a plan investment, the company sponsoring the plan can get operating capital from its own employee(s). The participant rolls qualified funds from an IRA or former employer plan into their new plan account. With employer stock as an investment option, the participant directs the plan to use the rollover cash to buy stock of the new entity, which must be a C corp. In this way, the company gets operating capital and the plan participant-entrepreneur defers taxation on their investment.

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