Prohibited Transaction Exemption

[imchipbrown]

An employer makes a contribution to its PSP of $40K and the Plan lends the Employer $40k the same day. Is this covered under the VCP Class Exemption? Is a filing required? The $40K represents less than 10% of plan assets. Only owners (100% owner and adult children through attribution) are participants.

[Peter Gulia]

Without expressing a view about whether there was a prohibited transaction ....

And leaving aside questions about which correction or restoration opportunities might be available ....

If the plan's administrator is the business organization controlled by family members and the plan's trustee and other fiduciaries all are family members, is there anyone who wants to pursue correction or restoration of a prohibited transaction?

[Guest Sieve]

A VFCP application must be filed (a requirement of the PT exemption), which requires, among other things, repayment of the loan (with interest). And, I'm assuming the loan was at a market rate of interest.

[imchipbrown]

OK. No one's recollection is clear.

One person thinks the Plan lent the company the $40k

Another thinks the Participant/Owner borrowed the $40k that day.

Still another thinks the employer changed its "mind", so still has a contribution receivable.

[Guest Sieve]

You have to determine the facts yourself--we can't do that for you.

If the employer takes the deduction for the contribution, then clearly it was a contribution followed by a loan. If no deduction is taken, then there is an argument that the contribution was made in error & was returned--but only a mistake of fact permits the return of a PSP contribution, & what was the mistake of fact here?