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Author: LasVegasFool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75339  
Subject: 401(k)'s Date: 4/10/1998 10:10 PM
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I'm trying to convince my boss to set up a 401(k). What I would consider ideal is one where we had on-line brokerage accounts and managed our own investments of our money.

Does such exist?
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Author: gdc45 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2737 of 75339
Subject: Re: 401(k)'s Date: 4/10/1998 11:30 PM
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Self directed 401(k) accounts do exist, but a couple of caveats usually work against an employer implementing such a plan.

First, IRS guidelines hold employers responsible for investment offerings within the plan (sec 404?).

Second, plan administrators usually charge more this type of plan. However, if you have a relatively small company and a boss that wants a self directed 401(k), more power to you.

That's my .02...GDC



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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2741 of 75339
Subject: Re: 401(k)'s Date: 4/11/1998 10:36 AM
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LasVegasFool,

<<I'm trying to convince my boss to set up a 401(k). What I would consider ideal is one where we had on-line brokerage accounts and managed our own investments of our money.

Does such exist?>>

With today's technology, that should pose no problem. But as gdc45 mentioned, the cost will be a major issue with employers as well the potential fiduciary liability. The latter can be overcome with an educational effort as required by Section 404c of the IRC. As long as the plan itself includes conservative, medium and high risk offerings (e.g., money market, bond and stock funds) in addition to the self-directed option, there's no problem there. It's education that's the big issue.

Regards…..Pixy



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Author: LasVegasFool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2743 of 75339
Subject: Re: 401(k)'s Date: 4/11/1998 12:42 PM
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>First, IRS guidelines hold employers responsible for >investment offerings within the plan (sec 404?).

Can you explain this in more detail?

> Second, plan administrators usually charge more this >type of plan. However, if you have a relatively
> small company and a boss that wants a self directed >401(k), more power to you.

It's not particularly that he wants such, it's that I don't think I could convince him to accept any other sort of system.

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Author: lvig Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2745 of 75339
Subject: Re: 401(k)'s Date: 4/11/1998 2:15 PM
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From the boss angle is it better to save and go discount broker ? or stay with full firm?

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Author: KATinChicagoland Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2747 of 75339
Subject: Re: 401(k)'s Date: 4/12/1998 12:32 AM
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<<The latter can be overcome with an educational effort as required by Section 404c of the IRC. >>

An excellent response, except you won't find anything about that in section 404(c) of the IRC -- you're referring to section 404(c) of ERISA.

Just call me "TMF Picky"

KAT in Chicagoland
http://www.fairmark.com
Tax Guide for Investors
Includes the latest information on
Roth IRA technical corrections


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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2748 of 75339
Subject: Re: 401(k)'s Date: 4/12/1998 9:27 AM
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KAT,

<<An excellent response, except you won't find anything about that in section 404(c) of the IRC -- you're referring to section 404(c) of ERISA.

Just call me "TMF Picky">>

Drat! I keep forgetting there's a sharp-eyed legal beagle out there...........

Pixy

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Author: SUPERDAVE Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2816 of 75339
Subject: Re: 401(k)'s Date: 4/14/1998 4:10 PM
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gdc45 writes

<<First, IRS guidelines hold employers responsible for investment offerings within the plan (sec 404?).>>

Responsible how? If they offer 8 lousy mutual funds that underperform the market, are they responsible for the poor performance? In a self-directed 401(k) plan, would they be responsible for the employee's poor investment choices?

SuperDave

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2844 of 75339
Subject: Re: 401(k)'s Date: 4/15/1998 9:21 AM
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<<Responsible how? If they offer 8 lousy mutual funds that underperform
the market, are they responsible for the poor performance? In a
self-directed 401(k) plan, would they be responsible for the employee's
poor investment choices?>>

No. Yes.

Alas, this is the way the world works. In a legal system where tobacco companies are held responsible for the choices that their customers make, a company is quite likely to he held responsible for allowing their employees to make poor investment choices.

I have talked to our plan administrators about even providing investment training classes. They have said that they are safer (legally) in providing no education whatsoever.(!!) If any part of this training can be construed as "giving investment advice", then they can be held legally liable for bad investment performance. They turned white at the thought of even mentioning the overall superior performance of an index fund.

With this framework, it is not surprizing that very few employers allow self-direction of any part of your 401k money.

Regards,
Ray

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