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THE ROAD TO HELL - ERISA VERSION

December 13, 2004

The BenefitsBlog tells a sad story about a CPA whose good intentions led him to the the tax version of the warm place where so many good intentions lead.

Joseph Rollins was the sole trustee of his firm's 401(k) plan. He loaned plan money to firms in which he had a minoirty interest. His good deed was punished with "prohibited transaction" taxes of around $164,000.

   Moral of the story: No matter how good an investment 
   looks for a plan, ERISA fiduciaries, trustees, and 
   certain owners and entities should get competent 
   legal advice regarding application of the prohibited 
   transaction rules when entering into transactions with 
   retirement plans, especially in cases where common 
   ownership exists or conflicts of interest issues are 
   present.

Remember, the penalties for prohibited transactions are horrendous, even if the transactions don't hurt the plan.

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