Retirement Plan Dreams May Go Up in Smoke for Marijuana Companies

Marvin "Bucky" Swift • October 30, 2019

Companies in the medical and recreational marijuana industry continue to face an uphill battle for access to financial services.   Although a number of states have legalized the medicinal and/or recreational use of marijuana, marijuana remains classified as a Schedule I drug subject to the federal Controlled Substances Act.  As such, financial services companies that wish to serve the marijuana industry could find themselves subject to the Bank Secrecy Act and the criminal money laundering provisions.  Those challenges are well documented.  However, do the same types of challenges exist if a marijuana company wants to sponsor a qualified retirement plan for its employees?  The answer appears to be a resounding yes.  A number of recent articles have documented cases in which large financial services companies have refused to open accounts for marijuana companies wanting to sponsor a retirement plan or have terminated the relationship with a plan sponsor when it was discovered the plan sponsor was in the marijuana industry.  While some state regulated financial services companies may offer retirement plan services to marijuana companies, many major financial services companies that offer retirement plan services refuse to offer those services to companies in the marijuana industry.

As if the financial services issues facing the marijuana industry weren’t enough, the IRS also provides challenges for a marijuana company that wants to make tax-deductible contributions to a retirement plan for its employees.  Code Section 280E disallows any deduction in carrying on any trade or business if the trade or business consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act ).  Therefore, if a company is in the business of growing and/or selling marijuana (whether or not legal under State law), any deductions that relate to that trade or business, including the deduction for a contribution to a retirement plan, could be disallowed under Code Section 280E.  However, that result could depend on whether the marijuana company is a cash-basis taxpayer or an accrual-basis taxpayer using the applicable inventory-costing regulations.  See Chief Council Memorandum 201504011, (January 23, 2015) (discussing whether certain expenses can be included in the “Cost of Goods Sold” calculation as an adjustment to an entity’s gross receipts).  The rules under Code Section 280E (and the inventory-costing regulations under Code Section 471) are complex and, while there is room for interpretation, marijuana companies may face challenges in their efforts to make tax-deductible contributions to retirement plans.

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
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