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A ROBS-funded company operates both a C-Corporation and a qualified retirement plan. Formation is only the beginning: the plan and company must continue to follow tax, ERISA, reporting, governance, participation, and fiduciary requirements. The IRS describes ROBS as an arrangement that is not inherently an abusive tax-avoidance transaction, while highlighting failure, discrimination, valuation, promoter-fee, reporting, and prohibited-transaction risks. See the IRS ROBS compliance project.

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Core responsibilities

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Establishment and funding

  • Adopt and operate the company-sponsored 401(k) plan according to its terms
  • Complete direct rollovers using compatible eligible sources
  • Support the plan trust’s stock purchase with a good-faith fair-market-value determination
  • Keep personal, corporate, and plan assets separate
  • Maintain the company as an active operating business

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Ongoing administration

  • File the applicable Form 5500 series return each year
  • Determine the annual fair market value of plan assets, including private company stock
  • Track employee eligibility, provide required notices, and perform required testing
  • Deposit employee contributions within applicable deadlines
  • Maintain corporate, plan, payroll, contribution, and transaction records
  • Review transactions involving the plan, company, founders, family members, and service providers for conflicts and prohibited-transaction risk
  • Keep the corporation in good standing and report material changes promptly

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What Nexus supports

Ongoing Nexus administration includes Form 5500 filing, required testing, ERISA fidelity bond renewal, cap table and valuation recordkeeping, and registered-agent renewal and filing service fees.
The founder and Plan Sponsor remain responsible for the accuracy of filings and for fiduciary and operating decisions. Talcott Forge is not a law firm, tax advisory firm, accounting firm, registered investment adviser, broker-dealer, or ERISA fiduciary.

Prohibited transactions

Recognize transactions that require caution or professional review.

Form 5500

Understand the annual filing requirement.

Case law

Learn what selected IRA cases can and cannot tell ROBS founders.

Glossary

Review key ROBS terms.