Think offering a 401(k) plan is hard? What if your business is selling pot?
When a former client who’d taken a new job as human resources director at a large cannabis company told advisor Kristen Deevy about her employer’s interest in setting up a 401(k) plan, the Littleton, Colorado-based managing director at Pensionmark Financial Group, LLC agreed to look into it.
Deevy found out that it’s a complicated issue. “The more we looked at it, the more we realized that there would be hurdles,” she says. As states increasingly legalize marijuana, some fast-growing cannabis companies want to start a 401(k) plan to help them hire and keep good employees. But marijuana remains illegal under federal law, so most financial institutions won’t work with cannabis companies on retirement plans, which also fall under federal law. She and Pensionmark’s compliance department feel that the federal government hasn’t yet put something in writing that gives providers and advisors a clear OK to work with cannabis companies operating legally under state law.
Until that happens, Deevy doesn’t feel comfortable working with cannabis company plans. “I can see that there are two sides to this story. On the one hand, as an advisor, I feel like everyone should be able to save for their retirement,” she says. “But these are federally regulated plans, because they fall under ERISA. And I will not be an advisor who works with these plans until we can get clarity to address the concerns. We want to do things right: I’m all about providing retirement plan advisory services within the rules.”
The ongoing uncertainty impacts cannabis companies’ ability to have a 401(k) plan. Jewell Lim Esposito, an employee benefits attorney for 26 years, has spent the past two years educating cannabis executives, accountants, plan advisors, banks, in-house counsel, TPAs, and others on how the industry can serve these employers. “I know there are some providers and advisors that don’t want to be involved in the cannabis space, and that’s an acceptable business decision,” says Esposito, a Washington, D.C.-based partner at law firm FisherBroyles, LLP. “But if you do want to be involved in the space, it’s important to learn how cannabis companies can participate in 401(k) plans legitimately under ERISA and the Tax Code.”
Read the rest of the story in NAPA Net the Magazine, here.
