Self-Directed Retirement Plans for Alternative Asset Investing

Self-Directed 401(k) Plans for Principals-Only Overview

  • An EZ (k) Plan is a self-directed Profit Sharing Plan with a 401(k) option for business owners with no employees.
  • The EZ(k) Plan is particularly appropriate for principals, their spouses and any partners who wish to self-direct their Plan dollars into alternative asset investments.
  • Business entities that may utilize an EZ(k) Plan include corporations, LLC’S, partnerships and sole proprietorships.
  • An EZ(k) Plan is not appropriate for businesses with common law employees. A SEP IRA, SIMPLE IRA, or traditional 401(k) Plan may be more appropriate.
  • An EZ(k) Plan does not fall under ERISA, so the anti-alienation provisions of ERISA may not protect assets
    held in the Plan. However, many states have enacted laws to provide protection from creditors and bankruptcy law applies to exempt such assets in most cases.

The Advantages of an EZ(k) Plan

Plan participants can borrow up to 50% of the value of Plan assets to a maximum of $50,000.00. (Participant Loan(s) must be repaid in five years in substantially equal installments; 30 years for funds used to buy an owner-occupied home.)

You are the Trustee and Administrator of your EZ(k) Plan. (Which means you may have checkbook control over the Plan’s investments, if you so choose. If you prefer, hire a custodian/administrator such as RealTrust to perform the record-keeping and administrative functions for your Plan.)

The Contribution levels are higher than applicable to IRA's. (A Plan participant whose W-2 or Schedule “C” AGI income is up to $265,000.00 (for 2016), $270,000.00 (for 2017) will be eligible to make the highest contributions, as the Sponsoring Employer may contribute up to 25% of such AGI, subject to the maximum annual contribution limits: $53,000.00 (for 2016) and $54,000 for 2017)

Retirement is set at age 55, not 59 1⁄2, so distributions without penalty can be taken earlier. (You have to actually retire from the business sponsoring the Plan, though.)

In-kind Contributions are available for an EZ(k). (In other words, you may contribute any asset you or your company owns that is not a collectible (or otherwise disallowed) to your EZ (k) Plan in lieu of cash. The contribution must be made at fair market value and all contribution limits still apply.)

You can include a Roth 401(k) element with the Plan. (So, Participants may contribute after tax dollars to their accounts and realize tax-free earnings when they retire. There is no income limit to establishing a Roth 401(k), as is the case with Roth IRA’s. As of 2011, you can do an “in-plan” conversion of pre-tax assets to your Roth 401(k), so future earnings will be tax-free.

Acquisition financing when acquiring real estate in your EZ(k) Plan is generally exempt from debt-financed income tax (DFTI). (So, by utilizing an EZ(k) Plan vs. an IRA to buy leveraged real estate, you may benefit significantly on the applicable tax consequences.)

Increased contribution limits.
The annual salary deferral contribution limits of Employer-Sponsored Plans are described below:
 401(k), 403(b), 457:
  • 2016: $18,000
  • 2017: $18,000

Maximum Aggregate Contribution limits to Account where Participant is under 50:
  • 2016: $53,000

• 2017: $54,000

Catch-Up Contributions. Participants age 50 or older who defer salary into 401(k), 403(b), 457 or SAR-SEP Plans may make catch-up deferral contributions, as follows:
  • 2016: $6,000
  • 2017: $6,000

Maximum Aggregate Contribution limits to Account where Participant is 50 or over:
  • 2016: $59,000
  • 20167: $60,000

Open a RealTrust Self-Directed EZ(k) 401(k) Plan today:
 Self-Directed EZ(k) 401(k) Plan Application Kit