Definition of Participant Directed Plan

[Guest Agnes]

If a 401(k) Plan offers certificates of deposit as the sole investment in the plan and then the plan sponsor goes public and elects to establish a stock fund which allows participants to make a one-time election to purchase stock in the public offering -- is the plan a "participant directed plan"? I believe the question goes to the definition of the "exercise of control" - does the one time election rise to the level of "exercising control"?

[J Simmons]

I suppose for the one year in which the one time election is allowed, the plan did permit participants to direct the investments. So I would think you would indicate on the f5500 for that year alone that it is participant directed. This would certainly not qualify as an ERISA section 404© plan that gives plan fiduciaries some insulation from liability for investment underperformance. Also, CD's only (apart from the one time investment in stock)? I think your plan fiduciaries would be well advised to seek counsel from an ERISA attorney pronto!