One of the first practical questions people ask when exploring the Rollover for Business Startup (ROBS) strategy is: which retirement accounts can actually be used? Not all retirement savings are eligible, and understanding what qualifies is an important early step.
The most straightforward accounts to use are traditional 401(k) plans from a previous employer. If you have left a job and your retirement savings are sitting in a former employer’s plan, or have already been rolled into an IRA, these are the most common starting points for a ROBS arrangement with Business Funding Trust.
What You Need to Know
Traditional IRAs are generally eligible for ROBS. The funds can be rolled into the new corporate 401(k) plan as part of the transaction. However, Roth IRAs are typically not eligible because Roth contributions are made with after-tax dollars and have different distribution rules that complicate the rollover process.
403(b) plans — retirement plans commonly used by employees of nonprofit organizations, schools, and healthcare systems — are generally eligible as well, provided they are not still held by a current employer. The same logic applies: funds from a prior employer’s 403(b) can typically be rolled into the new ROBS plan.
Simplified Employee Pension plans, known as SEP-IRAs, are also generally eligible. These are common among self-employed individuals and small business owners. If you have been self-employed and contributing to a SEP-IRA, those funds can often be used in a ROBS structure.
One important caveat applies across all account types: funds that are still in an active current employer’s plan may be difficult or impossible to access unless you have reached a specific age or qualify for an in-service distribution. Most ROBS transactions involve funds from previous employers or accounts the individual already controls.
Because the eligibility of specific accounts can depend on plan documents, state rules, and individual circumstances, it is essential to review your specific accounts with a qualified ROBS provider like Business Funding Trust or financial professional before proceeding.
Ready to Take the Next Step?
Ready to explore whether your 401(k) can fund your entrepreneurial dream? Contact Business Funding Trust today for a free consultation. Our specialists can walk you through your options, help you understand the process, and lead you to a successfully funded business.
