[Code of Federal Regulations] [Title 29, Volume 9] [Revised as of July 1, 2006] From the U.S. Government Printing Office via GPO Access [CITE: 29CFR2509.75-2] [Page 347-348] TITLE 29--LABOR CHAPTER XXV--EMPLOYEE BENEFITS SECURITY ADMINISTRATION, DEPARTMENT OF LABOR PART 2509_INTERPRETIVE BULLETINS RELATING TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974--Table of Contents Sec. 2509.75-2 Interpretive bulletin relating to prohibited transactions. Sec. 2509.75-2 Interpretive bulletin relating to prohibited transactions. 2509.75-3 Interpretive bulletin relating to investments by employee benefit plans in securities of registered investment companies. 2509.75-4 Interpretive bulletin relating to indemnification of fiduciaries. 2509.75-5 Questions and answers relating to fiduciary responsibility. 2509.75-6 Interpretive bulletin relating to section 408(c)(2) of the Employee Retirement Income Security Act of 1974. 2509.75-8 Questions and answers relating to fiduciary responsibility under the Employee Retirement Income Security Act of 1974. 2509.75-9 Interpretive bulletin relating to guidelines on independence of accountant retained by Employee Benefit Plan. 2509.75-10 Interpretive bulletin relating to the ERISA Guidelines and the Special Reliance Procedure. 2509.78-1 Interpretive bulletin relating to payments by certain employee welfare benefit plans. 2509.94-1 Interpretive bulletin relating to the fiduciary standard under ERISA in considering economically targeted investments. 2509.94-2 Interpretive bulletin relating to written statements of investment policy, including proxy voting policy or guidelines. 2509.94-3 Interpretive bulletin relating to in-kind contributions to employee benefit plans. 2509.95-1 Interpretive bulletin relating to the fiduciary standard under ERISA when selecting an annuity provider. 2509.96-1 Interpretive bulletin relating to participant investment education. 2509.99-1 Interpretive bulletin relating to payroll deduction IRAs. Authority: 29 U.S.C. 1135; Secretary of Labor's Order 1-2003, 68 FR 5374 (Feb. 3, 2003). Secs 2509.75-10 and 2509-75-2 issued under 29 U.S.C. 1052, 1053, 1054. Sec. 2509.75-5 also issued under 29 U.S.C. 1002. On February 6, 1975, the Department of Labor issued an interpretive bulletin, ERISA IB 75-2, with respect to whether a party in interest has engaged in a prohibited transaction with an employee benefit plan where the party in interest has engaged in a transaction with a corporation or partnership (within the meaning of section 7701 of the Internal Revenue Code of 1954) in which the plan has invested. On November 13, 1986 the Department published a final regulation dealing with the definition of ``plan assets''. See Sec. 2510.3-101 of this title. Under that regulation, the assets of certain entities in which plans invest would include ``plan assets'' for purposes of the fiduciary responsibility provisions of the Act. Section 2510.3-101 applies only for purposes of identifying plan assets on or after the effective date of that section, however, and Sec. 2510.3-101 does not apply to plan investments in certain entities that qualify for the transitional relief provided for in paragraph (k) of that section. The principles discussed in paragraph (a) of this Interpretive Bulletin continue to be applicable for purposes of identifying assets of a plan for periods prior to the effective date of Sec. 2510.3-101 and for investments that are subject to the transitional rule in Sec. 2510.3- 101(k). Paragraphs (b) and (c) of this Interpretive Bulletin, however, relate to matters outside the scope of Sec. 2510.3-101, and nothing in that section affects the continuing application of the principles discussed in those parts. (a) Principles applicable to plan investments to which Sec. 2510.3- 101 does not apply. Generally, investment by a plan in securities (within the meaning of section 3(20) of the Employee Retirement Income Security Act of 1974) of a corporation or partnership will not, solely by reason of such investment, be considered to be an investment in the underlying assets of such corporation or partnership so as to make such assets of the entity ``plan assets'' and thereby make a subsequent transaction between the party in interest and the corporation or partnership a prohibited transaction under section 406 of the Act. For example, where a plan acquires a security of a corporation or a limited partnership interest in a partnership, a subsequent lease or sale of property between such corporation or partnership and a party in interest will not be a prohibited transaction solely by reason of the plan's investment in the corporation or partnership. This general proposition, as applied to corporations and partnerships, is consistent with section 401(b)(1) of the Act, relating to plan investments in investment companies registered under the Investment Company Act of 1940. Under section 401(b)(1), an investment by a plan in securities of such an investment company may be made without [[Page 348]] causing, solely by reason of such investment, any of the assets of the investment company to be considered to be assets of the plan. (b) [Reserved] (c) Applications of the fiduciary responsibility rules. The preceding paragraphs do not mean that an investment of plan assets in a security of a corporation or partnership may not be a prohibited transaction. For example, section 406(a)(1)(D) prohibits the direct or indirect transfer to, or use by or for the benefit of, a party in interest of any assets of the plan and section 406(b)(1) prohibits a fiduciary from dealing with the assets of the plan in his own interest or for his own account. Thus, for example, if there is an arrangement under which a plan invests in, or retains its investment in, an investment company and as part of the arrangement it is expected that the investment company will purchase securities from a party in interest, such arrangement is a prohibited transaction. Similarly, the purchase by a plan of an insurance policy pursuant to an arrangement under which it is expected that the insurance company will make a loan to a party in interest is a prohibited transaction. Moreover, notwithstanding the foregoing, if a transaction between a party in interest and a plan would be a prohibited transaction, then such a transaction between a party in interest and such corporation or partnership will ordinarily be a prohibited transaction if the plan may, by itself, require the corporation or partnership to engage in such transaction. Similarly, if a transaction between a party in interest and a plan would be a prohibited transaction, then such a transaction between a party in interest and such corporation or partnership will ordinarily be a prohibited transaction if such party in interest, together with one or more persons who are parties in interest by reason of such persons' relationship (within the meaning of section 3(14)(E) through (I)) to such party in interest may, with the aid of the plan but without the aid of any other persons, require the corporation or partnership to engage in such a transaction. However, the preceding sentence does not apply if the parties in interest engaging in the transaction, together with one or more persons who are parties in interest by reason of such persons' relationship (within the meaning of section 3(14)(E) through (I)) to such party in interest, may, by themselves, require the corporation or partnership to engage in the transaction. Further, the Department of Labor emphasizes that it would consider a fiduciary who makes or retains an investment in a corporation or partnership for the purpose of avoiding the application of the fiduciary responsibility provisions of the Act to be in contravention of the provisions of section 404(a) of the Act. [51 FR 41280, Nov. 13, 1986, as amended at 61 FR 33849, July 1, 1996]