Retirement Topics - Investing Plan Assets


In setting up a qualified plan, employers arrange how the plan's funds will be invested to increase and protect its assets.

Although there is no list of approved investments for retirement plans, there are special rules contained in ERISA that apply to retirement plan investments. In general, a plan sponsor or plan administrator of a qualified plan who acts in a fiduciary capacity is required, in investing plan assets, to exercise the judgment that a prudent investor would use in investing for his or her own retirement.

In addition, certain rules apply to specific plan types. For example, there are different limits on the amount of employer stock and employer real property that a qualified plan can hold, depending on whether the plan is a defined benefit, a 401(k) or another kind of qualified plan.

Certain plans, such as 401(k) plans, permit participant-directed investment. That is, when the plan offers at least three diversified options for investment, each with different risk/return factors, the participant can choose to invest his or her account assets between those options.

There are also certain restrictions for investment choices, for instance, both participant-directed accounts and IRAs cannot invest in collectibles, such as art, antiques, gems, certain coins or alcoholic beverages. They can invest in certain precious metals only if they meet specific requirements.

The Department of Labor Employee Benefits Security Administration provides guidance and oversight in the proper investment of certain retirement plan assets. Providing prudent due diligence was used in the selection of investment vehicles, neither the plan, trustees nor fiduciary are held liable for poor performance of the investments. Therefore, any losses of account value are born by the participants affected in defined contribution plans.

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