401k to small business without penalty (BeneTrends, Inc)?

Question

Has anyone heard of BeneTrends, Inc. They say they have a leagal way to transfer 401k funds to franchise/business without penalty. Has anyone used the “Rain Maker” plan or does anyone know what tax loophole they are using or if they are even legit?

http://www.franchiseopportunities.com/Zor_610050/Benetrends.htm

Answer 1

I have never heard of this company or the special provisions mentioned above. The IRS outlines specific conditions that are not subject to the I0% early withdrawal penalty prior to 591/2. Exceptions for Early Distributions from a Qualified Retirement Plan such as a 401(k):

Distributions upon the death or disability of the plan participant.
You were age 55 or over and you retired or left your job.
You received the distribution as part of "substantially equal payments" over your lifetime. Defined under IRS code section 72(t).
You paid for medical expenses exceeding 7.5% of your adjusted gross income.**
The distributions were required by a divorce decree or separation agreement ("qualified domestic relations court order"),

* The home-buying exception has the following additional criteria: you did not own a home in the previous two-years, and only $10,0000 of the retirement distribution qualifies to avoid the tax penalty.


** You do not need to itemize in order to claim the medical expense exception.

NO WHERE DID I SEE THE RAINMAKER PROVISION!!!!

You may also contact the following organization to ask the question or an ERISA attorney.

Contact PSCA
Profit Sharing/401(k) Council of America
20 N. Wacker Drive, Suite 3700
Chicago, IL 60606
312-419-1863
312-419-1864(Fax)
[e-mail]

About PSCA
Established in 1947, PSCA is a national, non-profit association of 1,200 companies and their 6 million plan participants. PSCA represents its members' interests to federal policymakers and offers practical, cost-effective assistance with profit sharing and 401(k) plan design, administration, investment, compliance and communication. PSCA's services are tailored to meet the needs of both large and small companies. Members range in size from Fortune 100 firms to small, entrepreneurial businesses.