Small businesses invest plan assets in a variety of ways. Participants may be permitted to direct the investment of their accounts – this is referred to as “Participant-Directed.” The trustee of the plan will provide the investments from which participants can choose and is responsible for educating the employees on the investment options available. The trustee is responsible for the investment of plan assets “prudently” and for the “exclusive benefit” of plan participants. Alternatively, the trustee may choose to direct the investment of plan assets on behalf of plan participants – referred to as “Trustee-Directed.” However, this also means the trustee can be held responsible for the performance of the plan’s investments.
Generally the investment powers and limitations for the trustee are outlined in the plan document. Investments may include mutual funds, certificates of deposit, real estate, stocks, bonds, annuities or life insurance contracts. Employee Incentive Plans, Inc (EIP) can provide you with various investment options for your plan and our advisory relationships will help you determine the right choice of investments and create an investment policy for the plan.