Plan investments

[Guest jim williams]

An employer has designed and launched its own private mutual fund which they want to offer as an investment option to its participants of its 401(k) plan. If the employer complies with Section 404© and offers other investment options, are there any restrictions on them including this investment in their 401(k) Plan?

[Jon Chambers]

404© is largely irrelevant to this issue. The quick answer, is yes there are many issues to be considered. First, would the plan meet any of the class PTEs (PTCE 77-3 is most likely). Then, is the selection of the proprietary fund supported by the plan's investment policy statement and an independent investment fiduciary (see the recent First Union case, and the terms of the settlement). While proprietary funds aren't prohibited, they raise numerous potential fiduciary concerns.

[Guest jim williams]

I agree the parties would satisfy the PTCE 77-3 as plan fiduciaries executing securities transactions. Assuming the fund is supported by the plan's investment policy statement, would the same fiduciaries be prohibited from receiving investment management fees paid by the participants? Would the fees have to be paid to the investment management company?