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Owner-Only Cash Balance Plan - Investment in Collectibles


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I have an owner only CBP that invested plan assets in collectibles (art and watches). They are held in a vault, so as I understand it there is no PT for personal use by a disqualified person, however, I believe the rules for self-directed accounts apply in this case and upon the purchase of the items, a deemed distribution occurred. I'd appreciate thoughts and commentary from others.

Investments in Collectibles in Individually Directed Qualified Plan Accounts _ Internal Revenue Service.pdf

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I am not intimately familiar with the rules around investments in collectibles, but the document you attached is talking about DC plans. I don't think it would apply to a DB plan, even if the business owner, who is presumably also the trustee, is the sole participant.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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The provision is IRC sec. 408(m) and it applies to "individually directed accounts." There are no regulations under it. I personally think that in the absence of regulations it would be hard for the IRS to take the position that a DB plan that happens to have only one participant now is an individually directed account, unless the plan had one of those really ancient/weird provisions for a separate account feature that some professional firms used to have before 401(a)(26) seemed to prohibit them, which it would have no reason to contain unless there was another participant, or they were worried about what would happen if someone else joined the plan.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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