We have a 401(k) PSP where each participant has their own earmarked account. One of the participants, who happens to be a plan trustee, wants to invest about 5% of his account in silver boullions. Is this a prohibited transaction?

The asset will be purchased with cash from his existing plan account, and the asset will be registered correctly under the name of the trust. The asset will be appraised annually, and will be held in a safe deposit box.

Any input would be greatly appreciated! Thanks ;-)

Code section 408(m) says that neither an IRA nor an individually directed 401k account can hold any "collectible". Collectibles include precious metals EXCEPT for certain Treasury-issued gold, silver or platinum coins or pure bullion. Bullion must be held in the possession of a bank trustee, not an individual trustee (putting it in a safe deposit box in a bank is not good enough). An individual trustee should not take home coins, display them, etc.