Self-directing a 401k plan... is it possible

5 Replies

I have a small company, set up as a C corp, complete with a 401k plan. I would like to self-direct my contributions to the plan. Is this possible? All I can find is information on Solo 401k plans, but I don’t think that will work with how our company and 401k are structured. Currently, it is just my wife and I that are employed, but we are actively working to bring employees onboard.

Looking forward to the comments from the experts on this board.

@John-David Herlihy

If employees are on the horizon, then your business will not qualify for a Solo 401(k).  Such plans are designed for owner-only businesses with no full time employees.

While it is possible to setup an ERISA 401(k) plan in a company with employees that can be self-directed, it is generally not beneficial to do so.  The administrative requirements of such plans as well as the liability you take on as a plan trustee make alternative assets less than simple, to say the least.

@John-David Herlihy

We use an ERISA plan as @Brian Eastman suggests with participant direction.  It doesn’t seem to difficult and our TPA handles the details. Everyone in the plan has to have the option to self direct. We call it an “outsourced plan” and when employees are allowed in the plan they must be allowed to self direct as well. Assuming you are the plan trustee It should be very easy to work with your plan sponsor and/or Third Party Administrator. If you run into any problems PM me for details. 

Thank you for the responses @Brian Eastman and @Carl Fischer  . These responses somewhat bracket what I have found out there. It looks like the liability associated with an self-directed plan is the reason most companies will shy away from this set up. I will continue to look into this as an option.

Thank you Carl for the clarification that all participants would have the self-directed option. This was my understanding and I believe what also leads to the potential additional liability.