- 10 -
disqualification would result in the denial of favorable tax
consequences, such as an employee's deferral of taxation. Id.
Congressional activity in this area is largely designed to
protect participants against the "detrimental operation of the
plan." See Pawlak v. Commissioner, T.C. Memo. 1995-7. The
regulations incorporate this policy by suggesting that
fiduciaries must act with "undivided loyalty" to the plan.2 The
general rationale behind these provisions is "to make sure that
those who do participate in such [qualified pension] plans do not
lose their benefits as a result of unduly restrictive forfeiture
provisions." H. Rept. 93-807, at 1, 2 (1974), 1974-3 C.B.
(Supp.) 236, 237. Instead, the sanctions should be imposed
ultimately on the trustee because "trustees generally are to have
2 See sec. 54.4975-6(a)(5)(i), Qualified Pension
Plan Excise Tax Regs., which provides:
The prohibitions of [section] 4975(c)(1)(E)
and (F) supplement the other prohibitions of
section 4975(c)(1) by imposing on
disqualified persons who are fiduciaries a
duty of undivided loyalty to the plans for
which they act. These prohibitions are
imposed upon fiduciaries to deter them from
exercising the authority, control, or
responsibility which makes such persons
fiduciaries when they have interests which
may conflict with the interests of the plans
for which they act. In such cases, the
fiduciaries have interests in the
transactions which may affect the exercise of
their best judgment as fiduciaries. * * *
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011