Allowable Investments?

[richard]

Can a pension or profit sharing plan invest in futures contracts? (In futures contracts, a deposit is made that is akin to a margin account, and is adjusted similar to buying stocks on margin. Hence, I suspect these investments cannot be made.)

Can a pension or profit sharing plan invest (long, not short) in options? (With options, the entire purchase price is paid for up from. Also, the maximum loss is the total price paid for the options. Hence, I suspect these investments can be made.)

For this purpose, let's steer clear of all diversification/appropriateness issues.

Thanks.

[IRC401]

Qualified retirement plans can and do invest in futures and options. If you do your homework, you'll find some PLRs discussing whether these investments generate UDFI. (IRC 514.)

I assume that your contemplated investments do not include anything that could be an impermissible type of employer security, such as an option on the employer's stock.

When you are making your investment decisions, don't forget to allow for the cost of explaining what you are doing to your plan's auditors or to your accountants for figuring out your IRC 514 issues.