The real opportunity for the 402b is to be a start-up company plan in which the management and staff are all participating. The structure would hold the stock of the employees/management, would be pre-tax, and would be funded initially out of monthly employee contributions, and eventually out of performance-related options, grants or company matching payments (like a 401k often is).
[box type=”tick” size=”large” style=”rounded” border=”full”]The structure may invest in its own company stock, or even other investments because it is company plan, the costs of establishment should be low on a per member basis.[/box]
Members like one example who has (apparently) significant assets and interest in more complex plans, could set up his own plan for those investments. But he is in a position to introduce these plans to the start-ups helps set up. (he is responsible for setting up their boards, recruiting key management, establishing finance …)
Furthermore many of these existing investments he has are in options or zero-value grant shares. In other words, theses new assets really have no market value because the company is just starting up. Therefore, the tax consequences of moving these existing corporate assets into a 402b – a taxable event – might not cost a nickel in some cases, even if the “theoretical” value of the investment once the company meets its targets could be in excess of $1M.
We would be interested in helping to source these kinds of situations in the US if you could find a way to make it financially interesting to me, I had the ability to get deep into the legal and tax aspects of understanding the projects (best way to sell the plan), and I could use the remuneration of this work to fund my own 402(b).
This style of 402b is tax deferred on gains and accumulation. It is a foreign regulated, registered and recognized retirement plan that is also acknowledged in the Foreign Account Tax Compliance Act (FATCA) as exempt from withholding. It is recognized in the O.E.C.D. Common Reporting Standard Automatic Exchange of Information (AEOI) globally as tax rules compliant and exempt non-reporting Foreign Financial Institution and excluded for reporting account.
[box type=”note”]The money flow must go from the funder to the Anti Money Laundering (AML) Licensed and recognized 402(b) plan registered Occupational Retirement Scheme Overseas (ORSO) and US Global Intermediary Identification Number (GIIN)- regulated Trustee Account that is Automatic Exchange of Information (AEOI) tax rules compliant and exempt; non-reporting Foreign Financial Institution (FFI) and excluded.[/box]
So In a start-up environment, top managers are not really concerned about upfront tax liability at all. They would kill for something to protect them from the tax on the capital gains of future investments. Middle managers would be interested in pre-tax contributions out of their monthly pay-checks.
The 402b Opportunity is Now! This structure (type) can serve both classes of members, without challenging fundamental principles.
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