Investments with a minimum networth

[artvandelay3]

Need a little guidence. Can you include investments in a particpant directed 401k (not SDBA) that imposes a minimum investment and/or a minimum networth? Off the top of my head it sounds like it's discriminatory.

[Lou S.]

I think you are going to fail the effective availability portion of the discrimination testing rules since it would effectively be available to a much higher percentage of HCEs than NHCEs

[artvandelay3]

Can we have seperate plans for HCE's and NHCE's? If so can you point me in the direction of some rules and how this is done.

thanks.

[K2retire]

You could have separate plans, but that would not solve your problem as they would have to be tested together.

[Bird]

I'm pretty sure investment company minimum requirements do not create discrimination issues for a plan. So, the plan couldn't say you need a minimum balance (or net worth) to self-direct, but investments in a menu (or under a brokerage account option) could have minimums - I'm just about sure of that.

A pretty well-known pension guy advocates, or used to, setting up separate plans - the key is that each is trustee directed, not participant directed, so they are all identical. Personally, I'd rather not have to explain that on audit, and can't imagine how it could be cost-effective.

[Tom Poje]

The ERISA outline book 9-X-A3b says at the 1999 ASPPA conference the IRS indicated a one participant plan who is the Trustee could be aggregated with other plans and not be considered discriminatory for BRF (of course such IRS comments do not necessarily reflect an actual Treasury position.

9-X-B2e3 says if a plan had 8 investments, one of which is a brokerage account with a minimum investment of 50,000 then anyone with less than 50,000 would not have the BRF available to them