Employer Securities Limit in 401(k) Plan

[KateSmithPA]

Two participants in a 401(k) plan have rolled over IRA accounts into the plan. The rollovers consist of employer securities of the plan sponsor. With these rollovers, the employer securities make up more than 10% of total plan assets. I do not believe this is a problem since the plan is a participant directed plan. However, the only actual direction I find, has to do with deferrals.

As long as the plan allows, is this situation okay?

Thank you.

[Guest Sieve]

The 10% rule does not apply to an individual account plan (i.e., a profit sharing plan, 401(k) plan, etc.). However, if salary deferrals in a 401(k) plan are required to be invested in employer securities, the 10% rule generally will apply to those salary deferrals--not your situation. (See ERISA Section 407(b).) So, you're OK.