How to Roll Over a 401k or a 403b Retirement Account Into a BORSA


Opening a new business requires capital. If you don't have a lot of resources for investment capital, using your existing 401k or 403b plan may be the only option to fund your new venture. The problem is that taking money out of these plans will result in income tax and penalties if you are under the age of 59 1/2. There is a way to purchase eligible stock in a private company through ERISA Section 408e. To accomplish this, you will create a "Business Owners Retirement Savings Account," given the proprietary acronym of BORSA by the Texas-based accounting firm, DRDA, LLC.

Hire a CPA who is familiar with ERISA 408e regulations. This is not a scenario commonly created for 401k plans, so you may need to ask around for those capable of setting this up. DRDA, LLC developed the term BORSA for its own product, but is not the only CPA firm capable of following the ERISA guidelines.

Write the adoption agreement. Unlike most 401k plans where you have a custodian or administrator for the plan, most BORSA plans are administered with the help of the CPA firm to do the filing and reporting.

Fill out 401k or 403b rollover paperwork with your existing plan administrator. If you are still employed with the company, check to see if you are allowed to roll part of the assets into a new program. This varies from plan to plan.

Open your new company, issuing shares of private stock that will be purchased in the BORSA plan using your rolled over 401k or 403b monies.

Transfer the cash from the BORSA plan's investment in the private stock of your own company into your corporation's bank account to use for expenditures.

Tips & Warnings

  • As the company grows and you no longer need to use 401k assets as capital investment, you can move the plan to a traditional 401k administrator who offers publicly traded equity investments.
  • The BORSA is a viable retirement savings vehicle where you can make tax deductible contributions on an annual basis based on income. Talk to your tax advisor.

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