Is this a prohibited transaction?

[Guest amfam2]

Suppose an insurance agent establishes a SIMPLE IRA for his agency and enrolls himself & his employees. The agent elects to fund the IRA w/annuities from an insurance company he sells for. Some of the ees decide that they would like to estab a SIMPLE IRA annuity w/this same company as well.

If the plan is not a DFI plan, and the employees are aware they can go anywhere to establish SIMPLE IRA.

Suppose insurance company pays commission on these annuities. Has a prohibited transaction taken place?

2nd question: suppose agent sells a SIMPLE IRA plan (not a DFI) at his brother's unrelated business. Brother & employees of that business establish annuities w/agent. Upon payment of commission, has a prohibited transaction taken place?

[Gary Lesser]

Could be unless all commissions/payouts are rebated to plan. See examples in Treasury Regulations Sec. 54.4975-6 regarding statutory exemptions.