D. Prohibited transactions
Certain transactions are prohibited under the law to prevent dealings with parties who may be in a position to exercise improper influence over a retirement plan. Fiduciaries are prohibited from engaging in self-dealing and must avoid conflicts of interest that could harm the plan.


The following are prohibited transactions:
  • A sale, exchange, or lease between the plan and party-in-interest;
  • Lending money or other extension of credit between the plan and party- in-interest; and
  • Furnishing goods, services, or facilities between the plan and party-in-interest.

Other prohibitions relate solely to fiduciaries who use the plan's assets in their own interest or who act on both sides of a transaction involving a plan. Fiduciaries cannot receive money or any other consideration for their personal account from any party doing business with the plan related to that business.

Prohibited parties (known as parties in interests) include:
  • The employer,
  • The union,
  • Service providers,
  • Statutorily defined owners, officers and relatives of parties in interest.

E. Reporting requirements

Disclosure and reporting
ERISA requires extensive reporting and disclosure requirements on employee benefit plans. They require various forms and information to be disclosed to participants and filed with either the Department of Labor or the IRS.

Major reporting and disclosure requirements:
  • Summary Plan Description (SPD) - Primary vehicle for explaining a plan's provisions and how it operates to plan participants. Must be made distributed to participants within 120 days of plan and within 90 days to new participants being covered. Updated SPD must be furnished every five years if changes are made; otherwise, every 10 years.
  • Form 5500 (Annual Report) - Annual reporting form filed with the IRS and the Department of Labor.
  • Summary Annual Report (SAR) - Narrative summary of Form 5500. Must be distributed automatically to participants within 9 months after end of plan year or 2 months after due date for Form 5500.
  • Individual benefit statements - Explanation of total accrued benefits and total nonforfeitable pension benefits, if any, which have accrued, or the earliest date on which benefits become nonforfeitable. Generally, must be furnished within 30 days of a written request from a plan participant, but not more than once a year.
  • Plan documents - Plan administrator must furnish copies of certain documents within 30 days of a written request and must maintain copies available for inspection.
Suitability

Related Articles
  1. Investing

    401(k) Lawsuits: How Employers Are Protecting Themselves

    Some companies are making it harder for employees to sue over retirement fund problems. Here is what you need to know about the trend.
  2. Retirement

    403(b)s Among Plans Not Covered by New Fiduciary Rule

    Some retirement plans, including 403(b)s, are not covered by the DOL's new fiduciary rule. Here's what it means.
  3. Financial Advisor

    Why Fiduciary Rule is Good News for Small Plans

    Under the new fiduciary rule small business owners may be subject to less risk for the plans that they sponsor. Here's why.
  4. Financial Advisor

    The Impact of Fiduciary Rules on 401(k) Advisors

    The final version of the DOL’s fiduciary rule provides some relief for advisors who serve 401(k) plans.
  5. Retirement

    Why Retirement Plan Sponsors Could Face Litigation

    A Supreme Court decision makes it easier for retirement plan participants to sue their employers. Apathy is not a strategy for plan sponsors.
  6. Small Business

    Protecting Your Employees' Benefits as a Fiduciary

    Employers who provide benefits to their employees have a fiduciary duty to protect those benefits.
  7. Retirement

    IRA Assets And Alternative Investments

    Interested in non-traditional investing? Make sure you follow the rules to avoid prohibited transactions.
  8. Small Business

    Surprise! Qualified Plan Sponsors Are Fiduciaries

    If you are a small business owner offering a qualified plan to employees, you are a fiduciary.
  9. Financial Advisor

    The 4-1-1 on 403(b) Plans

    These plans resemble 401(k) plans in many respects, but are specially designed for nonprofit entities.
  10. Financial Advisor

    Retirement Planning for the Self-Employed

    How to select a qualified retirement plan if you are self-employed and have no employees.
Frequently Asked Questions
  1. Why Do Most of My Mortgage Payments Start Out as Interest?

    Fear not: Over the life of the mortgage, the portions of interest to principal will change.
  2. What is the difference between secured and unsecured debts?

    The differences between secured and unsecured debt, and how banks buffer risks associated with each type of loan through ...
  3. How Many Times has Warren Buffett Been Married?

    Warren Buffett has been married twice in his life, but the circumstances surrounding the marriages were unconventional.
  4. What's the smallest number of shares of stock that I can buy?

    Many people would say the smallest number of shares an investor can purchase is one, but the real answer is not as straightforward. ...
Trading Center