party in interest?

[Pension Panda]

100% Owner of Company/Trustee of 401(k) Plan is also one of several trustees at an unrelated, publicly traded bank. He has asked if anything prevents him from purchasing bank stock (of which he is on the trustee board) in the 401(k) Plan. I've been looking at Party in Interest rules and prohibited transactions and can't find where this is a problem for the 401(k) plan. He is not an employee of the bank, he does not receive any direct compensation other than trustees fees that are unrelated to the number of shares bought or sold. Has anyone run into this before? It seems like it should be a problem but I'm not finding why it would be.

[Kimberly S]

A trustee of the bank, or a director?

If he is a director of a publicly traded company he has SEC reporting requirements for any stock that he purchases as a trustee of the 401(k) plan. He is also subject to insider trading rules for any shares of the company owned by an entity that he controls. Because there are potential trading restrictions on him as a director, one could argue that it is not a prudent investment for the trust. Does it rise to the level of a prohibited transaction? I don't know.

[Pension Panda]

Yeah, I agree with you. Aside from the SEC insider reporting requirements, I couldn't find anything actually preventing him from purchasing the publicly traded stock for the plan. He's just a doctor who was asked to sit on the board of trustees at a local publicly traded bank and he called us and asked if he was allowed to buy some stock with plan money. I thought it should be a problem and I got paranoid when I couldn't find anything preventing the activity. Hence, the post to the message board.