Prohibited Transaction?

[Belgarath]

Interesting question came up. We have a client (actually former client - we cancelled our contract with them because they would never get us data on time) who is moving their administration to a bank.

According to them, the reason they are moving the admin and assets to the bank is that the employer is taking out a business loan, and the bank will give them a better loan rate if pension admin and assets are with the bank.

In case this ever comes up with a client we want to keep, I'd appreciate opinions on this. It certainly seems like a prohibited transaction to me, and I can't locate a PTE that seems to allow it. Any thoughts? (take this with a grain of salt anyway - this client is a bonehead, and may well be misunderstanding what the bank said or is doing.)

Thanks.

[Demosthenes]

You have just been whacked with the velvet banking hammer. Very common practice but I have never seen it expressed as blatantly as your client makes it out.

I've heard banks say "we want to be your full service bank" or "if we could expand our relationship it would be better for you as well as for us" or "wouldn't it be great if there was one place you could go for all of your businesses financial needs". The implication is there but not a stated quid pro quo.

However, there could very well be a specific trade off. It is completely possible that the more services you buy, the lower the fee per service. I'm not even sure the fee packaging would be a prohibited transaction.

The PT or breach would come into play only if you could prove the employer put the screws to the Plan in order to get a better deal for the business.

May be another rock to be turned over, what's AG Switzer up to these days?