What you need to know about QRPs (qualified retirement plans) and how they’re connected to your entity structure

In this episode of Coffee with Carl, attorney Carl Zoellner explains the connection between your sponsoring entity and your qualified retirement plan.

Updated May 25, 2021

Today, I want to talk about the connection between your sponsoring entity and your qualified retirement plan. A qualified retirement plan (QRP) can be one of several types of plans. For most of our clients and the community at large that have small businesses, you’re really looking at a solo 401(k). 

How Your QRP Interacts with the Sponsoring Entity

There’s been some confusion about a sponsoring entity and the qualified retirement plan and how those entities work together (or the ownership of what is going on). I want to talk about what is the relationship between that sponsoring entity and that retirement plan.

The sponsoring entity for a QRP or solo 401(k) is best used as an active business. For most of our clients at Anderson, we’re using a corporation as the sponsoring entity. 

For our clients, we do a Wealth Planning Blueprint. If you go to your Blueprint, you’ll see your corporation usually drawn up as an orange box and it’s pointing to a purple triangle, which is your QRP

Now, where the confusion comes in is that many people think that the corporation owns that retirement account. It may seem like a narrow distinction, but it does not own the retirement account; it sponsors it.

Technically, you (as the individual) own that account. Your sponsoring entity can also contribute to your retirement account because you’re an employee of that corporation. 

You own that retirement account. 

So when you’re trying to invest with that 401(k) or QRP, you are the trustee of that account; therefore, you are writing the check. 

The confusion comes when we start to get into that first investment because people think they need to actually run something through that corporation, which will then go to the QRP, which will then make the investment. 

Realistically, you can sort of cut that first step off. It just needs to go through the qualified retirement plan, and you can invest with those qualified retirement funds directly. 

I just wanted to cover one of the little basic things that come up with QRPs, also known as solo 401(k)s. We will do some more videos on that. Clint has a ton of them out there if you want some more information on qualified retirement plans. It’s a great tool for real estate investors. 

The Takeaway

For those of you who may be watching this who may not be clients yet, and you have more questions, I would always suggest having that FREE Consultation. It doesn’t cost anything. It’s free, and you get a visual depiction of what we would suggest your entity structure and business looks like. 

So with that being said, please keep taking advantage of all of our free content out there. Coffee with Carl is just a bite-sized portion.

Clint and Toby put out some great in-depth strategies and scenarios

Michael Bowman has some great content out there as well. 

Toni Talks, another one of my colleagues, has some great videos. 

Take advantage of all the free stuff we offer. We want you and our clients to be as educated as possible so you can make great decisions for your business. 

So until next time, it’s been a pleasure chatting with you all again. Come back and join me for another cup of coffee. 

Thanks, everyone!


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Got an idea for a future Coffee with Carl? Send it to Carl at cwc@andersonadvisors.com.