solo 401k uses plan assets to purchase stock, prohibited transaction Options

[Kathy Moran]

A solo 401(k) plan had some creative accounting within the plan. Can you determine if indeed it is a prohibited transaction?

facts....principal took money out of the plan to buy non-publicly traded securities as an investment within the plan. The stock certificates are titled in the name of the plan. (not so much an issue, I think) BUT, he purchased stock in the company (bank) that he works for as Vice President. The principal does not own any stock in the company (bank) himself. Is this ok?

This post has been edited by Kathy Moran: Oct 7 2009, 07:51 PM

[masteff]

Bumping this so minds more knowledgable than mine will notice your question.

My opinion is that unless a) the bank is a trustee for any other assets of the plan (making the bank disqualified as well as the person in question) or b) the person was already a significant stockholder of the bank, then you're okay because the investment isn't "for the benefit" of himself as an individual.

But I'll defer to others opinions should anyone find fault in my thinking.

[A Shot in the Da...]

Kathy:

I think more detail is needed before some one can offer advice on this issue:

Is the following sets of facts correct:

An individual works for a bank.

This same individual owns another business and that businss sponors a plan. The plan is a solo 401(k) Plan.

As Trustee of that solo 401(k) Plan, the indivdual decides to purchase stock of the bank for which he is employed.

Was the stock purichased at the asking or bid price (i.e.) there was no special deal given to the individual?

I doubt there is a problem.

[vijendrasnv]

Hi,

I too agreed with Masteff.

The opinion is that unless the bank is a trustee for any other assets of the plan.