Valentine Ventures has developed a program to help cannabis business owners and their employees save for retirement
With so many traditional financial services being unavailable for cannabis industry participants, it’s almost shocking to see a company that is willing to openly embrace entrepreneurs in this federally illegal space.
But as the industry gains wider mainstream acceptance, financial institutions and investment firms are slowly opening their doors to the fastest growing industry in North America. Valentine Ventures, an investment firm based in Bend, Oregon, is one of the first — and perhaps only — companies in the U.S. that has developed a 401(k) program for cannabis businesses and their employees. The program is open to any cannabis company with a bank account.
Marijuana Venture spoke with Michael Bird of Valentine Ventures, who has been running the company’s 401(k) division for the past year to learn more about the program and how it can benefit the cannabis industry.
Marijuana Venture: To start, can you explain the program and services you’re offering for the cannabis industry?
Michael Bird: In short, we help provide tax savings and an employee benefit. Many people in the cannabis industry are focused on what’s right in front of them – the next year, month, week or even day. They aren’t usually thinking about their retirement and the long-term future of their finances.
However, we hope that retirement is a reality for every cannabis entrepreneur, budtender and trimmer. We help you get there and save on taxes along the way via a 401(k) plan. A 401(k) plan is a retirement plan set up by an employer. It works much like a personal IRA in that it provides a tax benefit on contributions. It is typically accompanied by a company match into participants’ accounts as well.
MV: Why should cannabis business owners consider starting a 401(k) plan?
MB: A 401(k) plan is particularly beneficial in the cannabis industry because it allows businesses to save on taxes. Business owners and other highly-compensated employees can set aside up to $55,000 per year tax-free. This is the best way to legally tax-shelter money.
A 401(k) plan is an affordable benefit and one of the most commonly sought-after benefits by employees.
MV: Are these plans in any way affected by the complications that prevent cannabis businesses and entrepreneurs from having access to traditional financial services?
MB: Unfortunately, you cannot contribute to a 401(k) with cash, so the only thing that is required of a cannabis company to have a 401(k) plan is a bank account with which the company can pay its employees. This bank account will be the source of contributions into the 401(k) plan. We have found that the tax savings of a 401(k) plan outweigh the cost of cannabis-specific bank accounts.
MV: Is this something that can benefit a smaller company that isn’t generating millions of dollars in revenue?
MV: Of course. Some people say they can’t afford to contribute to a 401(k). However, I believe you can’t afford not to contribute to your future. If you can commit to contributing – even a smaller amount – a 401(k) can prove to be a cost-saver. Above tax savings, a 401(k) can be useful for many other reasons: rewarding loyal employees, reducing employee turnover or just availing your employees the opportunity to save for their retirement. We see many business owners that want a 401(k) plan not for their own tax-savings, but to provide a benefit to their employees.
The beauty of a 401(k) plan is that it is a benefit to everyone in the organization.
MV: What made you decide to create this program?
MB: We originally started advising over 401(k) plans eight years ago because we believe America is facing a retirement crisis and we wanted to help people save money and make wise financial decisions so they can reach their retirement goals.
We started doing retirement plans specifically for the cannabis industry when the owners of a local cannabis company came to us asking if we could help them set up a 401(k) plan. Their CPA told them a 401(k) would save them a lot of money. They had talked with a lot of big names in the financial industry and had been turned down by all of them. We believe everyone deserves the right to save for retirement, so after looking into compliance a bit, we agreed to advise on the plan. There are multiple groups associated with administering a 401(k) plan, so we also had to talk with our partners to be sure they were also willing and able to work with cannabis companies.
Having done the groundwork to set up a 401(k) program for cannabis companies and seeing how underserved the industry was, we decided to promote our offering within the industry so that everyone who wants to save for retirement knows that they have an equal opportunity to these financial services.
MV: Have you heard of many cannabis companies looking to start 401(k) plans?
MB: You would be amazed how many cannabis companies have tried to open 401(k) plans but have been turned away by financial institutions. I also get a lot of interest from cannabis business owners who automatically assumed a 401(k) plan would be unavailable to them. We are pleased to let them know about our offering.
MV: How important is it for individuals to think about their future and retirement, even though they’re working in this fast-growing, “green rush” industry and often just focused on staying afloat from one month to the next?
MB: Thinking about right now is vital in the cannabis industry. However, you can’t expect anyone to think about your future for you. That doesn’t mean you have to constantly think about the future and not about the present, but making a one-time decision to contribute to your 401(k) plan will have a big impact on your future, without you having to put much thought into it.
This interview has been edited for length and clarity.