worr
Dec 22 1999, 01:39 PM
What is the IRS reg that states that a spun off company can not buy shares of its former parent in their K plan
MWeddell
Dec 22 1999, 02:59 AM
There isn't an IRS regulation on this topic.
What you're probably looking for is in Sections 404-407 of ERISA. There's an exception to the 404(a) duty to diversify investments (and the prudence duty to the extent it requires diversification) for employer securities. Because shares of the former parent's stock are no longer employer securities, this exception will cease to apply. The effect is that a sizeable portion of the plan assets may no longer be invested in the former parent company's stock.
[This message has been edited by MWeddell (edited 12-22-1999).]