Can an employer use their employees 401 k’s to purchase a house?

My husband works for a company and recently learned that the company has all of its employees money into a hedge fund type of account. The bosses have just recently taken out money from the 401 k account to use to buy a home. They said that the house that they bought was a investment for their company. The company is a pest control company. Can the bosses of this company do this with their employees 401 k account?

Asked on June 12, 2012 under Employment Labor Law, California


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Under the laws of all states in this country, the trustee under an employee 401 k account cannot invest such money in investments that are not approved by the United States Department of Labor. From what you have written and based upon my experience the purchase of the home may not comply with 401 k investing requirements.

Typically employees get to designate how their money is invested such a money market accounts and the like. From what you have written, a possible complaint against the employer with the Department of Labor nearest you may be warranted as well as meeting with an attorney that practices in the area of investment law.

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