stock fund in supplemental 401(k)

[benefitsguru]

Any reason to not offer employer stock fund in a supplemental 401(k)? Thanks!

[QDROphile]

Rather than play a guessing game, how about providing some relevant information, such as whether or not the stock is publicly traded and what you mean by a supplemental 401(k)?

No matter what, an employer stock investment option increases complexity and potential for trouble, especially if elective contributions are eligible.

[jpod]

Do you mean a NQ plan? How about Federal and State securities registration issues, for starters? Perhaps not a reason not to, but at least a consideration.

[benefitsguru]

I oversimplified the question. Stock is publicly traded (registration not an issue), and supplemental plan is a NQ plan that mirrors a 401(k) except that the Code's limits are not taken into consideration. I understand that some employers don't offer employer stock in their supplemental plan despite that all other 401(k) investments (deemed) are available in the supplemental plan.

[QDROphile]

Even with publicly traded stock there are securities law issues and there are accounting issues. None are show stoppers, but the additional complexity and potential for mistake and misunderstanding are a consideration.

[EBECatty]

Shouldn't the nonqualified plan be unfunded, in which case it's just the deemed investment return of publicly traded employer stock?

[benefitsguru]

Thanks for your reply. Yes, all investments are deemed investments so the plan remains unfunded. So any offering of employer stock would be a deemed investment. I'm thinking there may be an accounting reason because I can't determine any ERISA/securities laws reasons.