For those of you who are interested in self-directing, you see many websites (including this one) where the term “self-directed” is plastered all over the site. Sure, they may call the 401(k) plans: self-directed 401(k)s, Solo 401(k)s, Individual 401(k)s, Uni-Ks, etc.; however, the more appropriate terminology may actually be “self-administered” vs. self-directed.
“Self-directed” merely suggests that the investments from the plan can be self-directed. Okay, that is easy enough. Quite simply, self-directing is simply that…directing the investments on behalf of the plan. But, “self-administered” is a more accurate term in that the 401(k) plan must be operated and administered in compliance with IRS and DOL regulations. It is certainly much more than the fun part of “just writing a check.” As Trustee for the plan, you will have the legal responsibility for the plan’s compliance, in addition to choosing investment options on behalf of the plan. As Trustee, you must administer the plan and take this responsibility seriously.
So, while you may remember the marketing term “self-directed” more easily, it may behoove you to start thinking more in the sense of “self–administered.” It is this terminology that will assist you with your plan moving forward.
As always, the information provided is intended to be educational in nature. It is not intended, nor should it be interpreted as, any form of tax, legal, financial or investment advice. You must always consult with your respective professional in all such matters.