The plan asset rule can trigger additional compliance, such as:
When working with Rocket Dollar, we want to help you avoid triggering the Plan Asset Rule as this is a much higher standard and presents higher liability for issuing companies. With proper care and compliance, your fund should be able to enjoy more investment with minimal hassle.
The Plan Asset Rule applies after 25% or more of a fund or company share class is owned by retirement dollars, unless one of the exceptions below applies.
A key point is that the 25% rule applies to all share classes individually. For example if class A represents 90% of the fund/entity’s assets, and class B represents 10% of the total fund equity asset, you could not have more than 2.5% of class B shares owned by benefits or retirement plans.
Another example is a fund that has two classes of equity, with Class A representing 80% of the entity’s total equity, and Class B representing the remaining 20% of the entity’s total equity. If
benefit plan investors own less than 25% of the Class A interests but 25% or more of the
Class B interests, the assets of the entire fund will be considered plan assets. This is
true even though benefit plan investors own less than 25% of both the Class A interests and the
total equity of the fund.
Companies that are 100% owned by retirement plans - If a company is 100% owned by retirement plans, the Plan Asset Rule exceptions do not apply. As a result, in 100% Plan-owned scenarios, you must always apply the Plan Asset Rule.
IRAs, even though they are not subject to ERISA, apply to the 25% Plan Asset Rule.
Solo 401(k)s are not automatically subject to ERISA, as these plans do not have any common law employees to protect, but would still count against the 25% Plan Asset Rule.