Self-directed 401(k) owners, companies in the industry, and many professionals have been confused on what rules, if any, govern when buying precious metals with a self-directed 401(k). There is a code section in IRC § 408(m) that outlines what metals can be owned by a self-directed IRA and how they should be stored. I have an article that summarizes it here. However, this section of the code is written for IRAs, and many have questioned whether it should be applied to 401(k) accounts as well. The short answer is, “Yes,” and here are two reasons why:
I. Most Solo K plan documents adopt IRC § 408(m)
Most 401(k) plans, including Solo 401(k)s, adopt IRC § 408(m), which specify which precious metals your Solo K may own, and provides a storage requirement. Since the plan documents restrict what precious metals your 401(k) may own, all accounts under the plan must follow the plan rules. Many may wonder, “Well can’t I just amend my 401(k) plan?”
Not exactly. Most Solo K plans are volume-submitter IRS pre-approved plans and take years to create and get approved with the IRS. A change requires approval from the provider of those plans, and they’d have to change it for all of their customers. This isn’t likely to occur, especially given second point below.
II. The IRS wants your Solo K to follow the IRA “Precious Metals” rule
The IRS has issued guidance to 401(k) plans that are individually directed and has stated that the rules of IRC § 408(m) should be followed when a 401(k) account purchases precious metals. To view the IRS analysis, check out their resource page here.
Consequently, Solo 401(k) owners buying precious metals should follow the IRA rules for precious metals and should only buy qualifying gold, silver, platinum, or palladium, and should make sure that such metals are stored with a third party qualifying institution (bank, credit union, or trust company).