Investments Allowed

[Guest Sayles]

Help please! I have a physician client who is the trustee of his practice's 401(k) profit sharing plan. His brother works at the practice as a technician. The brother's wife is working for a new local bank, and he wants to buy $60,000 of stock in the new bank. (Not publicly traded) The participant's do have self-directed accounts. I have tried to talk them out of this because it seems troublesome and expensive but have been unable to find on paper any reason that it is not allowable. Thank you for any guidance.

[Guest jeffmccoy]

As long as it it not restricted in the plan's document the allowable investments would include:

Mutual Funds (load and no-load), Publicly-traded - SEC-registered securities, Private stocks, bonds, limited partnerships, LLCs, Annuties, Certificates of Deposit, Commercial Paper, Managed Accounts, SEC-registered real estate investment trusts, Unit investment trusts, U.S. Government securities, Life insurance policies, Deeds of Trust/mortgages, Real Property, Offshore funds and Tax liens.

The participant should also keep in mind the contribution limits for the pretax salary deferral contribution set by the IRS and the plan's adoption agreement. The IRS limit for 2006 being $15,000 or 100% of compensation, whichever is less.

[Kirk Maldonado]

There are some securities law issues that need to be examined, arising under both state and federal law.

[QDROphile]

Physicians are exempt from securities laws because medical school teaches them never to make bad investments. Under the attribution rules, a physician's 401(k) account is therefore exempt from securities laws. The transaction is also exempt under family attribution rules because the sister-in-law is treated as the same person as the physician and everyone know that banks can sell securities to their employees. But just to be safe, the sale should be handled through a broker in Canada to avoid securities laws altogether.

[WDIK]

Physicians are exempt from securities laws because medical school teaches them never to make bad investments. Under the attribution rules, a physician's 401(k) account is therefore exempt from securities laws. The transaction is also exempt under family attribution rules because the sister-in-law is treated as the same person as the physician and everyone know that banks can sell securities to their employees. But just to be safe, the sale should be handled through a broker in Canada to avoid securities laws altogether.

Your undertone appears to be too obvious. Please clarify. Are you creating a new category or merely combining the first and third?

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