A Guide to Party-in-Interest and Party-in-Interest Transactions

Marcella Pascal, CPA

A party-in-interest is defined by the Employee Retirement Income Security Act of 1974 (ERISA) to include the following:

  • Any person who provides services to the plan,
  • Fiduciaries and employees of the plan,
  • An employer whose employees are covered by the plan,
  • A person who owns 50 percent or more of such an employer or employee association, and
  • Relatives of any of the aforementioned individuals.

Certain plan transactions with parties-in-interest are prohibited under ERISA. These transactions are:

  • A sale, exchange, or lease of property;
  • A loan or other extension of credit (including late deposits of employee deferrals to the trust);
  • The furnishing of goods, services or facilities;
  • A transfer of the plan’s assets to a party-in-interest for the use or benefit of a party-in-interest;
  • An acquisition of employer securities or real property in violation of the 10 percent limitation.

There are certain exceptions regarding party-in-interest transactions that do not prevent a party-in -interest from receiving reasonable compensation for services to a plan or receiving benefits from a plan as a participant or beneficiary, as long as the benefits are in accordance with the terms of a plan as applied to all other participants and beneficiaries. In addition, payments to parties-in-interest for reasonable compensation for office space and other services necessary for the operation of a plan are permitted.

Understanding these concepts will help your plan create an effective anti-fraud policy and help fiduciaries maintain their proper legal and financial roles.

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