What types of investments may be made available through an SDO?
Some of those marketing SDOs and some employees lobbying for them suggest that there should or need not be any particular restrictions on the types of investments that would be available by way of an SDO. This is incorrect as a policy and legal matter. For the employee who says “this is my money and I should be able to invest it however I want,” the response is that there are important distinctions between money in an employer-sponsored retirement plan-including the money contributed by the employee-and personal investments made with take-home pay. If not for special tax rules enacted by Congress for employer plans, the value of an employee’s plan account would be taxable to the employee as soon as it vested. Instead, if an employer plan satisfies the requirements of the Income Tax Code and ERISA, income tax is deferred on the contributions (except for employee after-tax contributions) and earnings until the payout date. These special tax benefits are provided by law to encourage emplo
