All Forum Posts by: Bernard Reisz

@John Hyre Appreciate you mentioning this. I've had too many interactions in which I've attempted to convey to folks that Qualified Retirement Plans are subject to UBIT, including that resulting from UDFI - with only a LIMITED real estate exemption - only to be told that so-and-so "expert" knows how to set up retirement plans that are completely exempt from UBIT. 

Overall, industry players that just want to sell one-size-fits-all self-directed retirement account paperwork mistreat UBIT, UBTI, and UDFI - either by omission or overemphasis. There are of course excellent service providers that truly aim to deliver value and investors just need to be discerning. 

Although I wish the following would not hold true, alas it always has and still does: Caveat emptor!

@Tilmon Smith Resurrecting an old thread that has maintained its relevance, and perhaps even grown in relevance.

ERISA 401k plans covering non-owner employees can certainly be established to invest in real estate. The general rule that the tax code & IRS are investment neutral applies here just as they do in other scenarios. So, from an asset class perspective there are few restrictions on qualified plans.

Notwithstanding, there are numerous compliance hurdles to implementing such a structure. These hurdles are not unsurmountable, but awareness is necessary. 

The challenge consumers face in implementing such plans is the fact that it requires expertise in multiple disciplines that are seldom found under a single roof.

The required expertise includes, but is certainly not limited to:

• Qualified Retirement Plan design & administration
• Expertise in "self-direction" that includes the full gamut of expertise required in the "Solo 401k" and "SDIRA" realm
• An entirely new realm of expertise created by the wedding of "self direction" and ERISA

In my experience, for whatever it's worth, expertise in the first 2 realms are readily available if you know where to find the right folks - albeit not under 1 roof. Expertise in the 3rd domain remains difficult to find (bold marketing claims to the contrary, notwithstanding).

@Denise Mautone It works! Now, call @Yonah Weiss to make it happen!

😉

@Denise Mautone & @Yonah Weiss Y'all know this belongs in "Real Estate Connections"😉

@John Hyre & @Justin Windham For purposes of clarity, I've seen it - so no curiosity here.

@John Hyre Regarding plan design, Safe Harbor is the "last choice" - not the first. Once all options are explored and deemed not to be feasible should a "Safe Harbor" plan be adopted. Of course, for many - if not most - small businesses, Safe Harbor is the way to go. Still, defaulting to Safe Harbor results in many business owners missing huge tax deductions and/or unnecessarily over-contributing to employees. 

"One-size-fits-all" financial & tax products/services are the hallmark of a "provider" taking shortcuts to increase their own revenue and profit at the expense of "clients." It requires real effort to explore all options, based on each client's tax profile and objectives.

In some instances, such as "Safe Harbor" vs Non-Safe Harbor, not exploring all options "just" means incremental increased cost and missed deductions to some clients. Not ideal and not the route I'd advocate, but bearable.

In other instances, in which a financial/tax service provider promotes non-compliance to unwitting consumers, the potential costs can be astronomical to all clients.

Consumers of financial & tax services should always seek - and get - total transparency from their service/product providers.

@John Hyre Great to see you on this forum and appreciate your vote on my post earlier in this thread. Although we've never met, I've previously come across your content and respect you as a voice for all that can be great in the self-directed space - from both a compliance and strategy perspective.

Regarding your inquiry here, I can't respond to it directly for multiple reasons:

• I would not comment on a specific company or individual
• Marketing terms and trademarks have no inherent meaning - essentially meaningless - and the "product" can being sold using a trademark can theoretically change over time in any number of ways.

That being said, the best way for an expert such as yourself to get answers is directly from "the horse's mouth." Either reach out to them directly or get answers and review docs from multiple folks that have signed up for it.

For the edification of those that don't possess your level of expertise, a few generalities about the QRP & Solo 401k space may prove valuable.

• What is a "Solo 401k?" A "Solo 401k" is a 401k plan for which there are no non-owner employees eligible to participate.
• In other words, "Solo 401k" vs "ERISA plan" has nothing to do with whether your document provider calls it a Solo 401k or something else.
• If a business with no non-owner employees adopts a 401k plan it is a "Solo 401k," regardless of what the document provider calls it.
• If a business WITH non-owner employees adopts a 401k plan - even with a plan document that does not address ERISA, non-discrimination testing, etc., etc., etc. - it is NOT a "Solo 401k" regardless of what the document provider calls it.
• A "Safe harbor 401k" is still a "Solo 401k" if there are no eligible non-owner participants. BUT, if the plan document is not prepared correctly a Solo business that adopts a "Safe Harbor 401k" is - in a best case scenario - "shooting themselves in the foot."
• If a business that does have non-owner employees adopts a 401k plan, THEY SHOULD NOT BUY A DOCUMENT. They need meaningful compliance support from true QRP & 401k experts. Detailed and expert ongoing compliance support is needed. Anyone that buys/sells a QRP document without awareness of the compliance factors and does not engage/provide ongoing support for annual testing and compliance is being reckless.
• To the non-initiated, "Safe Harbor 401k" is just a plan design that's exempt from lots of QRP non-discrimination testing. It does NOT mean that if you buy a Safeharbor 401k document that you're "safe" from severe IRS & DOL penalties if the plan is not operated compliantly.
• From a plan design perspective, "Safe Harbor 401k" is often NOT the optimal design and results in unnecessary costs to the business owner AND missed tax deductions.

@Michael Plaks 🤣

An honor to merit a response from you... even if it entails some ribbing!🤩

Always looking forward to your pithy wit & wisdom!

@Taylor L. Way overdue, but I make an effort to honor every tag - which I'm honored to receive - with a response... even if takes some time to get to it. :) 

The pro rata rule does apply to 401k plan Roth conversions. BUT, (1) after-tax contributions and associated earnings can (theoretically) be isolated from (2) pre-tax contributions and associated earnings, thereby presenting opportunity to be more surgical & strategic with 401k & "QRP" conversions.   

Caveat: This is still a way oversimplified response to a question that can have incredible nuance to it.

@Yonah Weiss So many! And, there's def overlap between our lists. 

@Daniel Hyman

@Brandon Hall

@Taylor L.

@Mark Pedroza

@Michael Plaks

Hit the tag limit, but definitely thankful for so many more incredible pros on BP. Thank you all!

@Kyle Moffat Here you go! https://www.passivewealthstrat...