Permissable Investments in 401K/Profit Sharing Plan

[ERISA13]

Besides the plan document is there another source that lists out what a 401K / Profit Sharing Plan is allowed to invest in? I've been asked a lot lately about participants being able to invest in everything from gold to buying a farm inside a 401K plan. The plan document does not seem to be very specific in identifying what types of investments are permissable. I know the annual valuation requirement can cause some problems for some types of investments but is there anything published by the IRS or DOL that discusses what types of investments are generally allowed/disallowed in a 401K plan?

Thanks!!

[QDROphile]

IRC section 408(m), prohibited transaction rules under IRC section 4975 and ERISA section 406, regulations under ERISA section 404©, ERISA section 404(b). You might also consider issues related to receipt of unrelated business income.

[K2retire]

You also need to consider the cost of obtaining an appraisal of the property for each valuation, and liquidity to pay distributions. Both of those have the potential to raise questions of whether something is truly suitable to be a plan investment.

[Bird]

You're probably not going to find any plain English descriptions from the IRS or DOL about what investments are permitted. If this is a participant-directed plan, as one would infer from your statement about "...participants being able to invest in everything from gold to buying a farm inside a 401K plan", then it is almost certain that the plan should have parameters on those investments, or the SPD or other employee communications. Real estate and other non-publicly traded assets are bad enough in a trustee-directed plan; I don't even want to think about it in a participant=directed plan.

[mbozek]

Besides the plan document is there another source that lists out what a 401K / Profit Sharing Plan is allowed to invest in? I've been asked a lot lately about participants being able to invest in everything from gold to buying a farm inside a 401K plan. The plan document does not seem to be very specific in identifying what types of investments are permissable. I know the annual valuation requirement can cause some problems for some types of investments but is there anything published by the IRS or DOL that discusses what types of investments are generally allowed/disallowed in a 401K plan?

Thanks!!

You need to review the restrictions in the PT rules of IRC 4975, specifically an employee using a 401k account to purchase a business in which he or she owns more than 50% interest. See Flahertys Arden Bowl Inc v. Comm, 115 TC 269 (2000). Or loaning his /her plan assets to a family member.

[masteff]

Need to look at plan fiduciary issues surrounding selection of investment options as well.