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I am going to be a bit blunt here. When I read questions like this I just shake my head and say why do people come up with these crazy ideas? I mean let's just for the sake of argument you can do what you are asking that doesn't mean it is a good idea. Here are the first things that come to my mind: 1) is the outside person in any way related to the plan sponsor and other disqualified people that would create PT issues? 2) If there 401(k) plan is something other then a 1 man plan then is doing this a violation of fiduciary duties? 3) Since I doubt this investment is to gain access to simple mutual funds to as they wouldn't need the 401(k) plan to do that it is pretty safe to assume this is some more exotic investment that isn't very liquid or easily valued. So the trustee has a duty to report the CORRECT value of the assets on the 5500. How will the trustee do that? Once again if the plan has more then 1 person in it how do you value this asset to get the benefits in case someone needs a distribution? What about a loan how do you compute the balance to know the max loan amount? Will there be enough cash to give the max loan amount? Same problem if someone wants a hardship payment. 3) You can find plenty of threads on here where 401(k) plans with real estate in them have a problem when it comes time to pay an RMD and the plan doesn't have enough cash and this illiquid investment can't be sold in time what do they do? They end up being stuck paying the 50% excise tax. 4) What happens if the 1 man plan needs to pay a QDRO and the plan allows the Alt payee to take the money right away-- a common feature in a 401(k) plan. Once again how is this going to be valued? Will there be enough cash to fund the QDRO? 5) What if the 401(k) plan refuses to give the "investor" his money back what is his recourse? How does that interact with the anti-alienation rules for Qualified Plans? Honesty, I am not even sure I understand the question. I mean how do you invest in a 401(k) plan? It isn't an investment. It is trust that is used to hold assets at its most basic level. You seem to be asking can someone put money in the trust that isn't a participant and share in the plan's returns. If so, I would say no. But to be blunt (again) even if whatever you are thinking is legal I will say these kinds of "creative" money making plans with 401(k) plans tend to end badly way more often then not. So I would say stop spending time even looking into it.

I think after tax makes sense for DB + DC Single Participant Plan. Can conplete 415 in DC with after tax and then convert.