Prohibited Transaction/ERISA Violation?

[lkpittman]

Client has a plan where all assets may be self-directed. Participant (partner) wants to take all money in accounts in plan and purchase a single parcel of real estate. His account will consist then, of this single piece of real property (vacant land, no UBTI). Problem is, he also wants to purchase a portion of this property personally, i.e., the title to the property will be in the trust (about 75%), for his benefit and in his own name personally (about 25%). I don't like the smell of it. Sounds like a PT, but can't put my finger on it--possible fiduciary breach--dealing w/plan assets in fiduciary's own interest? Any comments? Thanks.

[QDROphile]

Absolutely. The participant (a fiduciary for tax purposes, but not ERISA purposes -- and an affiliate under 404© regulations, so the 404© regulation protection from other Title I violations is not available) is personally benefitting because he gets an interest in property that he could not otherwise get without the investment of plan funds. You are correct that it stinks.

[actuarysmith]

I concur. This would be considered a PT - it stinks! I only wish they had a message icon with someone holding their nose............

[lkpittman]

Yes, that would be a perfect icon! Thanks for your input. I've been doing more research and found more info on "co-investing" and self-dealing. Thanks, all.