A plan with about 20 participants is invested in real estate among other things. The value of the real estate is very low right now and will probably remain illiquid for some time. The owner, who is the trustee directing investments, feels badly about the value of the real estate and wants to push everyone out of the real estate investment into self directed 404(c) compliant accounts. The owner/HCE would be the only participant invested in the real estate. Seems like this would be discriminatory. Any thoughts?

I have dealt with a similar situation over the last 18 months with an employer with about 300 employees, but otherwise very similar. The DoL has been agreeable, but only after DoL was comfortable with the independence of the appraisal of the value of the real property.

However, I would give each employee the opportunity--and have him sign off if he doesn't take it--of keeping his proportion of the real estate. For those that take it, have them sign off that they so want to keep their proportion, and acknowledge that the trustee will sell the realty without their further consent if needed for plan liquidity purposes or the trustee otherwise is of the prudent opinion selling at that time is in the best interests of all participants whose benefits are represented in part by the real estate investment.

They actually did that a while back. There are still a few left in the real estate. No way to force them out, eh? Has the DoL issued any guidance or made informal commentary on this?

Not that I'm aware of. Darn it.