Disproportionate investment of plan assets in residential mortgages not imprudent
Article Abstract:
A US district court in Maryland ruled in favor of the qualified plan administrator in Reich v. King, an action brought by the US Dept of Labor because the defendant had invested over 70% of plan assets in residential mortgages. King, who was also the owner of the plumbing company that established the plan, had the burden of proof to show that the investments were prudent since they were clearly not diverse. The court found that King had not made imprudent investments of plan assets because he investigated thoroughly, was familiar with the market and had a 8.93% rate of return.
Publication Name: Tax Management Compensation Planning Journal
Subject: Law
ISSN: 0747-8607
Year: 1995
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Investing majority of qualified plan's assets in single track of real estate did not violate ERISA's diversification rules
Article Abstract:
The US Court of Appeals for the Fifth Circuit ruled in Metzler v. Graham that a retirement plan fiduciary's decision to invest 63% of the plans assets in a single track of real estate was not a breach of fiduciary duty. The Dept of Labor argued that plan investments must be diversified and that the purchase of the land involved a conflict of interest. The Court found that the purchase was not a conflict of interest and that diversification is an issue to consider when assessing investment strategy but is not a separate and independent requirement.
Publication Name: Tax Management Compensation Planning Journal
Subject: Law
ISSN: 0747-8607
Year: 1997
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Mortgage loans from bank under program established by pension trustees not subject to s. 72(p)
Article Abstract:
An IRS private letter ruling appears to accept a below-market mortgage loan program for qualified benefit plan participants when the plan invests in a bank and the bank agrees to make the loans. IRC section 72(g) restricts the ability of qualified plans to make loans to participants. By using two accounts at the bank, ensuring that plan funds could not be reached by the bank and requiring credit worthiness, the loan program received IRS approval. The letter ruling did not address prohibited transaction considerations.
Publication Name: Tax Management Compensation Planning Journal
Subject: Law
ISSN: 0747-8607
Year: 1995
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