What is a prohibited transaction in ERISA, and who enforces it?

What is a prohibited transaction in ERISA, and who enforces it?

• A. Any improper transaction between a plan and a party in interest or disqualified person; enforced by the DOL and IRS.
• B. Any loan from the plan to a participant; enforced by the plan administrator only.
• C. A transaction between two unrelated plans; enforced by the fiduciary board.
• D. A transaction that requires investment in employer securities; enforced by the Treasury.

Answer: (A)

A prohibited transaction is an improper deal between a retirement plan and someone who has a relationship with the plan (a party in interest) or a disqualified person. This rule exists to prevent self-dealing or using plan assets for personal benefit and to protect participants’ benefits. Enforcement comes from the Department of Labor under ERISA (through the EBSA) and the Internal Revenue Service as part of the tax rules that apply to plans. They oversee compliance, impose penalties, and apply any excise taxes when prohibited transactions occur.

A prohibited transaction is an improper deal between a retirement plan and someone who has a relationship with the plan (a party in interest) or a disqualified person. This rule exists to prevent self-dealing or using plan assets for personal benefit and to protect participants’ benefits. Enforcement comes from the Department of Labor under ERISA (through the EBSA) and the Internal Revenue Service as part of the tax rules that apply to plans. They oversee compliance, impose penalties, and apply any excise taxes when prohibited transactions occur.