the Law:
The Internal Revenue Codes permitting these transactions go back prior to 1954. They were reorganized and expanded with the passage of the Employees Retirement Income Security Act (ERSIA) of 1974. 1978 saw the codification of Salary Deferrals [401(k) plans]. The growth of the stock market during the 1990s and the extension of individual participant investment control of 401(k) accounts led to a burgeoning desire for these plans.
The following links are to the pertinent parts of the Internal Revenue Code and ERISA. In 1974, Congress took the "prohibited transactions" sections from the 1954 Code and moved it to Section 4975. Congress wrote a parallel but not identical "prohibited transactions" section and placed it in the Labor Code, what we refer to as ERISA today, and they cross refer.
| Internal Reveune Code | ERISA |
|---|---|
Prohibited Transactions |
Prohibited Transactions |
§ 503 [pre-1974] |
[nothing comparable] |
§ 4975(d)(13) [1974-on] |
§ 406, 407 & 408 [1974-on] |
§ 4975(e)(2)(H) |
|
§ 4975(f)(6) |
§ 408(d) |
Unrelated Business Taxable Iincome |
Trustees and Valuations |
§ 513(b) |
Dovovan v. Cunningham |
No Commissions, Kickbacks or Fees |
|
Title 18 USC 1954 |
IRS Guidance:
The IRS publishes its thinking on various topics on its website, usually in .pdf or .html form. We have in the past provided IRS's links to these pertinent documents, but the IRS keeps moving them. These links are to copies of the original IRS files on oursite, but we encourage you to search for them on the IRS.gov site if you wish.