According to the IRS, which action is prohibited regarding funds in a qualified retirement plan?

The prohibition concerning funds in a qualified retirement plan primarily revolves around the use of those funds for business purposes. The IRS strictly does not allow individuals to repossess or use the funds in a qualified retirement plan for personal business needs. This is to safeguard the integrity of retirement savings and ensure they are preserved for retirement rather than being diverted for immediate, non-retirement-related business uses.

Investing the funds, while regulated, is generally permissible as long as it conforms to the guidelines set forth by the plan and is aligned with investment strategies approved by the plan. Additionally, borrowing against the funds is allowed within certain limits, as many retirement plans have provisions in place that enable participants to take loans from their accounts. Likewise, withdrawing funds for emergencies can be permissible in specific circumstances, though it may incur taxes and penalties depending on the situation and the plan's rules.

The emphasis on not permitting funds to be leveraged for business purposes underlines the IRS’s objective to protect retirement funds and ensure they serve their intended purpose—providing financial security during retirement.