Receiving comission on your own plan?

[Guest Rexx]

Hi,

I had a question about a potentioal prohibited transaction. If an investment advisor were to provide their employees a retirement plan, would making themselves the broker of record and therefore receiving comissions be considered a prohibited transaction?

Thanks

[R. Butler]

Yes

[Guest Dook]

Not necessarily. Read DOL PTE 79-60.

[Guest TrustMe401k]

See also DOL PTE 77-9 (as amended and now PTE 84-24)

[R. Butler]

Would 77-9 apply? Per the post tthe person receiving commissions is the employer. I didn't think that PTE 77-9 covered employers.

I may agree about PTE 79-60, it would probably be worth looking into.

[Guest Rexx]

From what I found on PTE 79-60:

Insurance Agents-In-House - Permits sale of insurance to plan by an agent or broker who is the plan sponsor or a related person.

This could sort of apply to the situation, but it's not really insurance.

I'm surprised this doesn't seem to be clearly addressed.

In a nutshell, the plan sponsor is considering being the broker of record on their own retirement plan. There are assets in the plan already and if they took the plan over, it would result in a comission.

[Guest Dook]

If it is not insurance, then I don't know of any guidance. Check this link for DOL exemption procedure information:

http://www.dol.gov/ebsa/regs/ind_exemptionsmain.html

[Guest dbvail]

In the absence of current information, I'll offer that in 1990 a local business owner, who was also an agent, was paid the commission on his plan. As a result of a 'random' audit, the case was forwarded to the DOL who promptly had him repay the several thousand dollars. I assume they had support for the action. Self dealing and exclusive benefit etc? Hope this helps.

[Guest Pensions in Paradise]

Let's be real. Even if it is not a PT, do you think it is advisable for a plan sponsor to engage in that sort of activity. The participants could sue at any time for breach of fiduciary duty (unless of course the plan sponsor/broker was paid an extremely low commission which could not be challenged in court).