- 14 -
the taxes imposed by sections 4975(a) and (b) of the
Internal Revenue Code with respect to the transactions
prohibited by section 4975(c)(1) of the Code. [29 C.F.R.
sec. 2550.404c-1(d)(3) (1993).]
The regulations are effective “with respect to transactions
occurring on or after the first day of the second plan year
beginning on or after October 13, 1992.” Id. sec. 2550.404c-
1(g)(1). Both parties agree that the loans at issue were repaid
before the effective date of the regulations and the regulations
do not apply to the transactions in this case. Nonetheless, it
should be noted that the result attained by the regulations
coincides with our reasoning.
Furthermore, this provision of the regulations has its
genesis in proposed regulations issued in 1987 and 1991. In
1987, the Department of Labor issued proposed regulations
regarding participant-directed plans. See 52 Fed. Reg. 33508
(Sept. 3, 1987). The preamble to the proposed regulations
provided, in part:
Prohibited transactions. Finally, the proposed regulation
makes it clear that * * * the relief provided by section
404(c)(2) extends only to the provisions of part 4 of Title
I of ERISA (relating to fiduciary responsibility).
Therefore, even if a prohibited transaction is a direct and
necessary consequence of a participant's exercise of
control, nothing in section 404(c) of ERISA would relieve a
"disqualified person" described in section 4975(e)(2) of the
Code (including a fiduciary) from liability for the taxes
imposed by sections 4975 (a) and (b) of the Code with
respect to such prohibited transaction. [Id. at 33513.]
In 1991, the Department of Labor issued new proposed
regulations regarding participant-directed plans. See id. at
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011