401(k) plan - amended to take 404(k) dividend deduction.

[Guest jvanheyde]

A traditional 401(k) PSP of a publically traded company has 15 investment options for self-direction. One of those options is "company stock." The company would like to amend the plan to take advantage of the Section 404(k) dividend deduction provision that was amended by EGTRRA.

The company is NOT going to make an employer contribution that is set aside in a newly created ESOP account. Instead, they want to take the position that the Company Stock Account in the self direction investment menu is the ESOP portion of the plan.

Apparantly, the recordkeeper has seen this done on several occasions, and has even shown me an amendment.

I don't see how you can take the position that an investment option is a plan designed to invest primarily in employer securities, even if you throw in all kinds of 409 and 4975(e)(7) that applies to that investment option. We are talking about 401(k) deferrals and matching money that one day might be in a bond fund and the next day in company stock. How is that a plan or provision designed to invest primarily in employer securities.

[QDROphile]

I have ranted about the intellectual bankruptcy of this scheme in another thread. But the IRS buys it and I have done it and received determination letters.

[david rigby]

Perhaps I'm just easily impressed, but note that QDROphile used "ranted" and "intellectual bankruptcy" in the same sentence.

For the curious, here is the rant, er discussion.

http://benefitslink.com/boards/index.php?showtopic=12283