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funds. However, E pressures his employees to borrow
funds under P's participant loan program and then
reloan the loan proceeds to E. F, unaware of E's
activities, arranges and approves the loans. If the
loans meet all the conditions of section 408(b)(1),
such loans will be exempt under that section. However,
E's activities would cause the entire transaction to be
viewed as an indirect transfer of plan assets between P
and E, who is a party in interest with respect to P,
but not the participant borrowing from P. By coercing
the employees to engage in loan transactions for its
benefit, E has engaged in separate transactions that
are not exempt under section 408(b)(1). Accordingly, E
would be liable for the payment of excise taxes under
section 4975 of the Code.
* * * * * * *
Example (5): F is a fiduciary with respect to plan P.
D is a party in interest with respect to plan P.
Section 406(a)(1)(B) of the Act would prohibit F from
causing P to lend money to D. However, F enters into
an agreement with Z, a plan participant, whereby F will
cause P to make a participant loan to Z with the
express understanding that Z will subsequently lend the
loan proceeds to D. An examination of Z's credit
standing indicates that he is not creditworthy and
would not, under normal circumstances, receive a loan
under the conditions established by the participant
loan program. F's decision to approve the participant
loan to Z on the basis of Z's prior agreement to lend
the money to D violates the exclusive purpose
requirements of sections 403� and 404(a). In effect,
the entire transaction is viewed as an indirect
transfer of plan assets between P and D, and not a loan
to a participant exempt under section 408(b)(1). Z's
lack of credit standing would also cause the
transaction to fail under section 408(b)(1)(A) of the
Act.
Example (6): F is a fiduciary with respect to Plan P.
Z is a plan participant. Z and D are both parties in
interest with respect to P. F approves a participant
loan to Z in accordance with the conditions established
under the participant loan program. Upon receipt of
the loan, Z intends to lend the money to D. If F has
approved this loan solely upon consideration of those
factors which would be considered in a normal
commercial setting by an entity in the business of
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