Self Directed Account

[PFranckowiak]

Small 401(k) allows for Self Directed Brokerage Accounts

HCE 1 Owns Business that has 401(k) and also an LLC (That lends money for business start ups)

HCE 2 (over 5% owner of ER sponsoring the 401(k) (also a trustee of 401k plan wants to take part of his SD Account in invest in LLC owned by HCE 1, which is a loan that pays interest only and then principal after 5 years.

Broker does not think its a Prohibited Transaction as the loans are to other companies.

Prohibited Transaction????

Thanks

P

[Bird]

Maybe it's just me but I don't follow the scenario. Maybe if you gave the companies different names ("A" and "B") it would help, because from reading it, it seems like one company.

[PFranckowiak]

Company A, owned by HCE 1 and HCE 2 has a 401(k) plan that allows for SD Brokerage Account.

Company B, LLC owned by HCE 1 (In business to loan money for start up companies)

HCE 2 wants to invest in a note from Company B in his SD Brokerage Acount.

P

[BG5150]

Any control group or ASG issues?

[masteff]

HCE 1 is a disqualified person. They are proposing a transaction between the plan (via the SD account of HCE 2) and a disqualified person (by virtue of that person being the owner of company B, the LLC).

Smells like a PT to me.

[PFranckowiak]

HCE 1 60% owner of Company A, HCE 2 40% owner of Company A Company A has the plan.

HCE 1 I think 100% owner of Company B

P