UBTI in a 401k plan

[alcat649]

I am a 401k plan administrator. I'm being asked by a participant to allow her to continue to invest in a publically traded LP which *could generate UBTI (Fidelity has told us that the security is no longer allowed in their 401k plans, but will allow us to grandfather her in).

At any rate, I want to get some info to better advise the plan trustees on this issue.

Should there be more that $1000 of UBTI generated and the plan has to file a 990-T, how arduous is this filing?

Additionally, I assume that the participant would be responsible for the tax, paid out of her 401k, are there any issues with this?

And, Are there any issues that I am not seeing? Any liability for the other members of the plan or the plan itself?

Thanks