Plan does not permit investment. Plan holds assets.

[Guest Iwonder]

When a plan was restated from an individually designed plan onto a prototype in 2004, plan sponsor elected, and indicated in an adoption agreement, that plan assets were not to be invested in life insurance products.

At the time of the restatement, individual participant accounts held, and currently continue to hold, life insurance products.

Client is arguing that the investments are not impermissible because they existed at the time of the restatement. The prototype plan is silent as to grandfathering in assets in existence when a plan is restated.

It seems that the plan sponsor should have either elected that the plan could hold life insurance investments (to reflect the assets that were in life insurance at the time of the restatement) or the life insurance investments should have been liquidated at the time of the restatement.

Any guidance would be appreciated.