ROBS and retirement-funded business: understand the risks

What ROBS means

Rollovers as Business Startups is a financing arrangement in which retirement money moves into a new qualified plan that purchases stock in a business, typically a C corporation. Recognition of this structure is not an IRS endorsement of a provider or a guarantee of tax-free treatment.

Retirement savings remain at risk

Plan qualification, employee participation, stock valuation, prohibited transactions, and ongoing reporting all matter. Compliance failures can lead to plan disqualification and serious tax consequences. The IRS found substantial business failures in its ROBS compliance project, including losses of retirement savings. A business failure can leave you without both income and the retirement assets invested in it.

TSP access depends on your circumstances

Active participants face in-service withdrawal restrictions, including separate age-based and financial-hardship rules. Separated participants have different distribution options. Having TSP assets does not establish that they are available or eligible for a particular rollover. Confirm your employment status, account type, distribution eligibility, and tax treatment with TSP and an independent adviser before moving money.

• TSP in-service withdrawals
• TSP post-employment distributions
• TSP plan summary

Questions to take to an independent professional

• Which assets are eligible, and what rules apply to my specific plan and distribution?
• Who is responsible for plan administration, valuation, employee eligibility, filings, fees, and corrections?
• How much retirement security would I lose if the business failed?
• Does the promoter receive compensation, and what alternatives should I compare?

Consult qualified tax, ERISA/legal, and financial professionals who can evaluate your circumstances and conflicts of interest. This page is general education, not individualized financial, legal, or tax advice.