[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: 29CFR2509.75-6]



[Page 352]

 

                             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.  2509.75-6  Interpretive bulletin relating to section 408(c)(2) of 

the Employee Retirement Income Security Act of 1974.



    The Department of Labor today announced guidelines for determining 

when a party in interest with respect to an employee benefit plan may 

receive an advance for expenses to be incurred on behalf of the plan 

without engaging in a transaction prohibited by section 406 of the 

Employee Retirement Income Security Act of 1974. That section prohibits, 

among other things, any lending of money from a plan to a party in 

interest, or transfer to, or use by or for the benefit of, a party in 

interest of any assets of the plan, as well as any act whereby a 

fiduciary deals with the assets of a plan in his own interest or for his 

own account.

    However, section 408(c)(2) of the Act provides that nothing in 

section 406 of the Act shall be construed to prohibit the reimbursement 

by a plan of expenses properly and actually incurred by a fiduciary in 

the performance of his duties with the plan. Questions have arisen under 

section 408(c)(2) of the Act as to whether a plan may reimburse a party 

in interest in the performance of his duties with the plan and as to 

whether a plan might make an advance to a fiduciary or other party in 

interest for expenses to be incurred in the future.

    The Department of Labor views the relevant provisions of section 

408(c)(2) as clarifying the scope of section 406 so as to permit 

reimbursement of fiduciaries for expenses incurred in the performance of 

their duties with a plan. Similarly, consistent with section 408(c)(2), 

section 406 is construed to permit the reimbursement by the plan of 

expenses properly and actually incurred by a party in interest in the 

performance of his duties with the plan.

    If a plan makes an advance to a fiduciary or other party in interest 

to cover expenses to be properly and actually incurred by such person in 

the performance of his duties with the plan, a prohibited transaction 

within the meaning of section 406 shall not occur when the plan makes 

the advance if--

    (a) The amount of such advance is reasonable with respect to the 

amount of the expense which is likely to be properly and actually 

incurred in the immediate future (such as during the next month), and

    (b) The party in interest accounts to the plan at the end of the 

period covered by the advance for the expenses actually incurred 

(whether computed on the basis of actual expenses incurred or on the 

basis of actual transportation costs plus a reasonable per diem 

allowance, where appropriate).

    It should be noted, however, that despite the reasonableness of the 

amount of the advance and of the expenses underlying it, the question of 

whether incurring such expenses was prudent, and thus whether the 

advance was for reasonable expenses, is to be judged pursuant to section 

404 of the Act (relating to fiduciary responsibilities).



[40 FR 31755, July 29, 1975. Redesignated at 41 FR 1906, Jan. 13, 1976]