Gold Investment... must it be held by a custodian?

[K-t-F]

A single member plan participant would like to invest in Gold.  In an IRA the rule is that the gold must be held by a custodian.  Is that the same for qualified retirement plans?  Is this single member "solo" plan participant allowed to invest in say Canadian Maple Leafs and keep them in his safe deposit box?

Thanks

[Mike Preston]

No. Yes.

[K-t-F]

A man of few words.  NO... it's not the same in qualified retirement plans... and YES .. he can keep them in his safe deposit box.

Thanks

[Mike Preston]

34 minutes ago, K-t-F said:

Thanks

YW

[Larry Starr]

5 hours ago, Mike Preston said:

No. Yes.

Man of few words......

[K-t-F]

a quick followup.... is there a cite to hang my hat on?

Appreciate it.

[Mike Preston]

Sure. Read the Internal Revenue Code and ERISA.  You will find an absence of any provision restricting ownership/handling except in provisions that apply to IRA's.  That which is not prohibited is allowed.

[RatherBeGolfing]

18 hours ago, Larry Starr said:

Man of few words......

[JOH]

Having worked for an IRA custodian that specialized to alternative asset, I disagree.  Solo 401(k) plans are non-ERISA and assets within that plan has to held in trust.  So if a individual in a solo 401(k) plan want to invest in precious metals through their Solo 401(k), those precious metals must be held in trust and cannot just be held in a participant's safe deposit box.  How would the custodian of the Solo (k) be able to provide valuations if the assets were not held in the name of the Trust Company FBO the plan?  The company I used to work for had over 300 solo k plans and some invested in precious metals and all were held bought and held in trust by the Trust Company for FBO the plan.

[Purplemandinga]

Can't a solo 401(k) choose to be subject to ERISA by filing a 5500? Similar to how 403(b) church plans work?

[Mike Preston]

JOH, you are missing one salient fact: a 1 participant, non-ERISA plan will, 99 44/100% of the time have the participant also be the Trustee.  

[Mike Preston]

Just now, Purplemandinga said:

Can't a solo 401(k) choose to be subject to ERISA by filing a 5500? Similar to how 403(b) church plans work?

No.

[JOH]

23 minutes ago, Mike Preston said:

JOH, you are missing one salient fact: a 1 participant, non-ERISA plan will, 99 44/100% of the time have the participant also be the Trustee.  

here's a blog about this.  The assets still need to held in trust.  Just like the cash portion of the Solo 401k can't be held a checking account in your name, an asset can't be held in a safe deposit box.  This could violate IRC 4975 if you personal hold and transact with these assets from your retirement account.

https://www.solo401k.com/blog/who-is-the-trustee-and-custodian-of-the-solo-401k/

[Larry Starr]

38 minutes ago, JOH said:

Having worked for an IRA custodian that specialized to alternative asset, I disagree.  Solo 401(k) plans are non-ERISA and assets within that plan has to held in trust.  So if a individual in a solo 401(k) plan want to invest in precious metals through their Solo 401(k), those precious metals must be held in trust and cannot just be held in a participant's safe deposit box.  How would the custodian of the Solo (k) be able to provide valuations if the assets were not held in the name of the Trust Company FBO the plan?  The company I used to work for had over 300 solo k plans and some invested in precious metals and all were held bought and held in trust by the Trust Company for FBO the plan.

Sorry. Not correct.  You worked for an IRA custodian and there it is true.  For a retirement plan, assume the trustee is also the owner of the employer and the sole participant.  Because he is the trustee, he can certainly hold the allowable precious metals in a safe deposit box owned by the trustee as trustee of the plan (I would suggest that it be a separate box from one owned by the individual as an individual). For a retirement plan, it sounds like your company was the trustee.

Here is some info:

Taking Physical Possession and Storing Solo 401k Precious Metals

Precious Metals in bar form including gold, silver, platinum and palladium under the Solo 401k have to be stored with approved depository taking institution such as Delaware Depository Service Company. However, if the Solo 401k trustee is an individual, he or she may safe keep the metal coins for the benefit of the solo 401k at a local bank or credit union. See IRS Private Letter Ruling 200217059. For full list of allowable coins click on allowable coin investments.

[Mike Preston]

2 hours ago, JOH said:

here's a blog about this.  The assets still need to held in trust.  Just like the cash portion of the Solo 401k can't be held a checking account in your name, an asset can't be held in a safe deposit box.  This could violate IRC 4975 if you personal hold and transact with these assets from your retirement account.

https://www.solo401k.com/blog/who-is-the-trustee-and-custodian-of-the-solo-401k/

A few things: Agree assets need to be held in trust. See Larry's message for what that means in this context. Your sentence that starts with "Just" is a false analogy. Of course the assets can be held in safe place under the control of the Trustee.  I would prefer, as Larry says, that the safe deposit box be in the name of Trustee as Trustee for the plan, but I've never seen the IRS enforce that.

Finally, this will be my last post on this topic. Please don't send me another secure message through my website.  That is intended for clients. Paying clients.  Or, at the least, potentially paying clients. 'Nuff said. Please don't clutter up this thread with an apology.  None necessary.

[Bob the Swimmer]

Thanks Larry, good list--in the mid-80's, we had a lawyer at a prestigious firm that recommended all his clients hold their retirement plan assets in Krugerrands--

he would have passed away by now, but I can't believe it worked out well for his clients now 35 years later.

[Luke Bailey]

On ‎4‎/‎8‎/‎2020 at 1:53 PM, K-t-F said:

A single member plan participant would like to invest in Gold.  In an IRA the rule is that the gold must be held by a custodian.  Is that the same for qualified retirement plans?  Is this single member "solo" plan participant allowed to invest in say Canadian Maple Leafs and keep them in his safe deposit box?

Thanks

Certainly agree with all other responses that say a solo K or other one participant plan for a one-owner business can be trusteed by the individual owner. Also, in the right circumstances a safe deposit box at a bank that is properly titled in the name of the plan could be proper safe-keeping by the plan's trustee for precious metals. But the OP specifically mentioned Canadian coins, which are  not on the permitted list for IRAs and self-directed accounts. See IRC sec. 408(m). So I think that whether this investment works (i.e., not treated as a distribution, which might or might not also disqualify plan depending on other facts) depends on whether the investment is a general investment of the plan, or an individually directed investment. Obviously, as long as the plan has only one participant who is also the trustee, the question is somewhat artificial,  but there is always the theoretical possibility that there would be other participants  and if the plan document specifies individually  directed investments, the Maple Leafs are a problem. Need to stick to U.S.-minted coins or bullion, then OK.