Fund My Franchise
ResourcesROBS Compliance Guide
Ongoing plan administration

ROBS Compliance Checklist: Before and After Funding

A ROBS arrangement needs continuing retirement-plan administration after your business receives funding. An IRS determination letter addresses the plan's written terms; it does not approve every transaction or protect improper operation.

By Fund My Franchise · Published
Updated · 6 min read

Weighing a 401(k) rollover for your franchise? Three quick ways to turn this guide into a plan:

Calculate a funding planTake the 2-minute fundability quizTalk it through with Al

Use this guide to organize a conversation with your plan administrator, CPA, and retirement-plan attorney. It focuses on the work before and after funding. For the structure and eligibility questions, start with our ROBS 401(k) rules overview.

Proper administration does not make the business investment risk-free. Retirement savings invested in the company can be lost if it fails. The following is a working checklist, not a legal opinion about your particular plan.

Source: IRS: ROBS compliance project.

Before funds move

  • Confirm account eligibility and the proposed corporate and plan structure with the professionals handling the transaction.
  • Get a written responsibilities list for the founder, administrator, CPA, valuation professional, and legal adviser.
  • Review the stock purchase, valuation approach, setup expenses, and ongoing administration budget before money moves.
  • Decide how much retirement capital you can place at business risk and what reserves remain outside the investment.

Treat these as questions to resolve together. A missing answer is a reason to clarify the plan before closing, especially when different providers expect someone else to handle the same task.

Six ongoing responsibilities

Responsibility 01

Operate the retirement plan after the business is funded

The plan continues after its stock purchase. Follow its written terms, maintain records, and coordinate required amendments, contributions, and participant transactions with your administrator. The IRS's 2008 ROBS memorandum discusses whether a plan is intended to provide ongoing retirement benefits; a funding transaction alone does not demonstrate sound ongoing administration.

Put it into practice: Ask for an annual administration calendar identifying who supplies payroll data, checks contributions, approves amendments, and retains records. Obtain copies of the executed plan and amendments. A suggested founder contribution percentage is not a substitute for following the actual plan terms.

IRS: ROBS guidelines (October 2008 memorandum)

Responsibility 02

Track employee eligibility and communicate plan benefits

Hiring changes the plan's responsibilities. Review each employee against the plan's eligibility terms and applicable requirements. The IRS flags arrangements that restrict participation or employer-stock access after the founder's purchase in ways that discriminate. Your administrator should evaluate coverage and benefits, rights, and features rather than assume the plan serves only its founder.

Put it into practice: Keep a current employee census, hire dates, hours, eligibility decisions, enrollment materials, and evidence of notices delivered. Ask which notices apply and when. Do not rely on a universal 30-day notice rule for every situation or exclude an eligible employee simply because they are not an owner.

IRS: ROBS compliance project

Responsibility 03

Document stock value and ownership transactions

A ROBS plan purchases an interest in the corporation. The purchase price and subsequent stock transactions need a defensible valuation process. The IRS memorandum identifies valuation as an examination concern, including whether the plan receives appropriate value for its investment.

Put it into practice: Before funding, establish who values the stock, the information they need, and how their work will be documented. Ask when valuations must be updated for reporting or later transactions. Keep valuation reports, stock purchase agreements, ownership records, and supporting financial statements together. Review any proposed stock sale or redemption before moving money.

IRS: ROBS guidelines (October 2008 memorandum)

Responsibility 04

Review fees, conflicts, and prohibited transactions

Do not assume every business setup or promoter expense can be charged to the retirement plan. DOL guidance distinguishes the services being provided, the reasonableness of fees, and how expenses are allocated. Plan, corporate, and personal funds need clear accounting; a payment involving an owner or related party can require specialized review.

Put it into practice: Request an itemized written fee schedule showing the service, payer, frequency, and any extra charges. Ask your administrator and advisers to resolve uncertain expenses before reimbursement. Document their analysis of related-party transactions rather than treating a provider invoice as proof that the payment is permitted.

Department of Labor: Evaluating plan fees

Responsibility 05

Assign annual plan filings and separate corporate filings

The IRS specifically says the annual Form 5500 remains required for ROBS plans. The small, owner-only plan filing exception does not apply merely because the founder is the only participant: the plan owns the business through its stock investment. Corporate tax reporting is a separate responsibility.

Put it into practice: Confirm who prepares, reviews, signs, and submits the plan return and who handles the corporation's Form 1120 and other applicable returns. Save filing confirmations, not just drafts. Ask who checks rollover reporting, including Form 1099-R where applicable, and how missing or incorrect filings will be addressed.

IRS: ROBS compliance project

Responsibility 06

Monitor the administrator and retain your own records

Hiring a third-party administrator does not remove every responsibility from the business owner or other plan fiduciaries. IRS guidance explains that selecting and retaining a service provider carries fiduciary responsibilities. Understand the provider's assigned role and monitor whether the promised work is performed.

Put it into practice: Review the service agreement, credentials, reporting, fees, and support for inquiries. Keep accessible copies of plan records and completed work. Clarify what happens if you change providers, sell the business, or close it. A provider's past experience is useful context, but it cannot guarantee future compliance or freedom from an audit.

IRS: Retirement plan fiduciary responsibilities

A simple review routine

Our practical suggestion is to keep one shared checklist with a responsible person, due date, completion evidence, and unresolved questions for each task. Set review dates with your administrator instead of assuming the monthly administration payment means every obligation is complete.

Notify your advisers before major changes: hiring, ownership changes, a stock transaction, a sale, or closure. If a filing is missing or an IRS notice arrives, preserve the notice and deadlines, gather the records, and ask who will coordinate the response. Do not wait for the next routine annual meeting.

DOL recommends monitoring service providers and documenting the process. The checklist above is one way to make that oversight practical; it is not an additional government-prescribed filing.

DOL guidance on fiduciary responsibilities

Sources and scope

This guide combines IRS and Department of Labor guidance with practical recordkeeping questions. The 2008 IRS memorandum is historical examination guidance, not a promise that a particular arrangement is compliant. Confirm the rules and plan terms that apply to your situation with qualified advisers.

Decide whether ROBS fits your franchise plan

Talk with Al about your eligible retirement accounts, overall funding needs, and the ongoing responsibilities. Bring this checklist so the conversation covers what happens after funding, too.

Book a Free Consultation
401(k) rollover servicesCalculate a funding planCompare funding optionsMore resources