TAX 9873 Lecture Notes - Lecture 24: Internal Revenue Code, Investment Fund, Employee Retirement Income Security Act
Document Summary
Irc section 4975 mirrors the pt rules under erisa section 406. Two levels of excise taxes under irc 4975. First tier excise tax for 15% of pt amount, which is imposed in each subsequent year until pt is corrected. Second tier excise tax for 100% of pt amount if pt has not been corrected when irs assesses tax. Example: irs assesses tax in year 3 after pt occurs. Cumulative excise taxes = 15% + 15% + 15% + 100% highly punitive tax. Erisa section 408(a) and mirror rules under irc contain numerous pt exemptions. Providing services for reasonable compensation from plan. Providing participant advice under an eligible investment advice arrangement. Statutory exemptions allow plans to enter into routine transactions. Permit any person to engage in covered transactions. Like statutory exemptions, class exemptions have requirements and conditions. Example: pte 77-4 (for proprietary mutual funds), pte 86-128 (for directed brokerage). Only person requesting exemption may rely on it.
