100% owner of company wants to invest his account balance into the com

[Guest Kelly Bermes]

I have a 100% owner of a company who wants to invest his 401(k) account balance back into the company. He has already maxed his personal loans from the plan. Currently there is no company stock in the 401(k) plan. My quesions are: What are his options for investing his account into the company? What options does he have without it being a prohibited transaction?

[IRC401]

I don't see how you could avoid having a prohibited transaction unless the shares where purchased from the Company and all particpants were given the opportunity to purchase stock in the Company. In that case, he better have a chat with a securities attorney about SEC issues.

[Bill Berke]

Document would have to permit this and the implications are that this is a participant directed account, and that this is not being done with employer contributions. If so this is okay. But as mentioned above, the number of people doing this may create state or federal securities laws issues. And the stock is purchased for its current market value and the same purchase terms are available to all in plan.