Under IRS rules, a company normally may do all of the following with funds in a qualified retirement plan EXCEPT:

Under the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act (ERISA), a fundamental requirement for a retirement plan to be "qualified" is the "exclusive benefit rule." This rule mandates that the assets of the plan must be held in a trust and used for the sole and exclusive benefit of the participants and their beneficiaries. An employer is strictly prohibited from diverting or repossessing these funds for any other purpose, such as funding its own business operations. Doing so would violate the trust's integrity and cause the plan to lose its tax-qualified status.

A. Plan assets are commonly invested in a diversified portfolio, which can and often does include common stocks, to generate growth for participants.

B. Shareholder-employees are permitted to participate in qualified plans and receive allocations, as long as the plan's formula does not discriminate in their favor.

C. Qualified plans are required to allow for the distribution of vested funds to employees upon a triggering event, such as termination of employment.

1. Internal Revenue Service (IRS). Retirement Plan Reporter - Chapter 2, Section 2: Required Provisions for a Qualified Plan. The IRS explicitly states, "A plan will not be a qualified plan unless the plan instrument provides that it is impossible for the employer to divert or use plan assets for a purpose other than for the exclusive benefit of employees or their beneficiaries." This is based on Internal Revenue Code § 401(a)(2).

2. Cornell Law School - Legal Information Institute. 26 U.S. Code § 401 - Qualified pension, profit-sharing, and stock bonus plans. Section (a)(2) states that the trust instrument must make it impossible, "at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be... used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries."

3. U.S. Department of Labor. Meeting Your Fiduciary Responsibilities. This official guide explains that a core fiduciary duty under ERISA is ensuring that plan assets are held in trust to be used for the "exclusive purpose" of providing benefits to participants and their beneficiaries.