Self directed plan

[Guest Tony Ramsey]

hello all!

We have a client who set up a 401k profit sharing plan.about 30 participants.They asked that we assist with establishment of accounts at Schwab and want each participant to complete an application to establish their own self directed account.The money will likely start in the participant's money market type account and then be available for each of them to invest as they choose (i.e. no menu of investment options) and access on-line just as if they had their own savings account with Schwab.

Is this a permissible type of self directed arrangement?

thanks!

[Jim Chad]

It is OK to have this arrangement. But I hope you are billing by the hour instead of a set fee. The amount of unexpected work has been truly aggravating.

[QDROphile]

Where does "just as if they had their own savings account with Schwab" begin and end? Can participants order up their own distributions? Plan assets must be held in trust ansd particpant access must be limited to providing investment directions. The plan is almost assured of disqualification errors if it does not maintain control over custody and movement of funds. Sponsors that want maiximum flexibility and minimum responsibiity are dangerous.

[K2retire]

Sponsors that want maiximum flexibility and minimum responsibiity are dangerous.

Unfortunately, they're also very common.

[401king]

Where does "just as if they had their own savings account with Schwab" begin and end? Can participants order up their own distributions? Plan assets must be held in trust ansd particpant access must be limited to providing investment directions. The plan is almost assured of disqualification errors if it does not maintain control over custody and movement of funds. Sponsors that want maiximum flexibility and minimum responsibiity are dangerous.

Our company establishes accounts through Schwab in the manner that (I assume) the OP is describing. A trust is established, so the only action participants may take on the account is with regards to trades. All distribution/contribution requests must be authorized by a trustee on the account, or authorized agent. It's more like an IRA account, with activity limited to trading.