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Trust Examination Manual
29 CFR 2509.75-6 - Interpretive bulletin relating
to section 408(c)(2) of the Employee Retirement Income Security Act of
1974.
Section Number: 2509.75-6
Section Name: Interpretive bulletin relating to section
408(c)(2) of the Employee Retirement Income Security Act of 1974.
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The Department of Labor today announced guidelines for
determining when a party in interest with respect to
an employee benefit plan may receive an advance for expenses
to be incurred on behalf of the plan without engaging
in a transaction prohibited by section 406 of the Employee
Retirement Income Security Act of 1974. That section
prohibits, among other
things, any lending of money from a plan to a party in
interest, or transfer to, or use by or for the benefit
of, a party in interest of any assets of the plan, as
well as any act whereby a fiduciary deals with the assets
of a plan in his own interest or for his own account.
However, section 408(c)(2) of the Act provides that nothing
in section 406 of the Act shall be construed to prohibit
the reimbursement by a plan of expenses properly and
actually incurred by a fiduciary in the performance of his duties with
the plan. Questions have arisen under
section 408(c)(2) of the Act as to whether a plan may reimburse a party in
interest in the performance of his duties with the plan and as to whether a
plan might make an advance to a fiduciary or other party in interest for expenses
to be incurred in the future. The Department of Labor views the relevant provisions
of section 408(c)(2) as clarifying the scope of section 406 so as to permit
reimbursement of fiduciaries for expenses incurred in the performance of their
duties with a plan. Similarly, consistent with section 408(c)(2), section 406
is construed to permit the reimbursement by the plan of expenses properly and
actually incurred by a party in interest in the
performance of his duties with the plan. If a plan makes an advance to a fiduciary
or other party in interest to cover expenses to be properly and actually incurred
by such person in
the performance of his duties with the plan, a prohibited transaction within
the meaning of section 406 shall not occur when the plan makes the advance
if--
(a) The amount of such advance is reasonable with respect to the amount of
the expense which is likely to be properly and actually incurred in the immediate
future (such as during the next month), and
(b) The party in interest accounts to the plan at the end of the period covered
by the advance for the expenses actually incurred (whether computed on the
basis of actual expenses incurred or on the
basis of actual transportation costs plus a reasonable per diem
allowance, where appropriate).
It should be noted, however, that despite the reasonableness
of the amount of the advance and of the expenses
underlying it, the question of whether incurring such
expenses was prudent, and thus whether the advance
was for reasonable expenses, is to be judged pursuant
to section 404 of the Act (relating to fiduciary responsibilities).
[40 FR 31755, July 29, 1975. Redesignated at 41 FR
1906, Jan. 13, 1976]
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