Does the 408(m)(3) apply to individually directed accounts in a 401(a)

[Guest Thornton]

I have a client that wants to invest in gold and silver bullion in a participant directed account under the company's profit sharing plan. I've read commentary that states that 408(m)(3) exception to the acquisition of coins and bullion applies only to IRA accounts. Yet when I read 408(m) as a whole, and subsection (3) in particular, I don't see any reference to IRA's only. Any thoughts?

[Mike Preston]

Only that you are right.

[E as in ERISA]

I don't understand. 408(m) says "The acquisition by an individual retirement account or an individually-directed account under a plan described in section 401(a) of any collectible shall be treated...as a distribution." 408(m)(3) provides an exception "In the case of an individual retirement account." If the prohibition by its terms applies to both but the exception by its terms applies to the IRA, does that suggest that "only" IRAs can invest in coins?

[Mike Preston]

Yes, it did. But that is the version that applies to years before 1998. For years after 1997 the exception applies to both IRA holders and inidividually directed accounts, doesn't it?

[E as in ERISA]

You're right! Although it appears that may have been unintentional? (They were mainly adding the exception for bullion)? I'd still be careful...since 408 doesn't typically apply to qualified plans.