Supreme Court decides Keystone: transfer of unencumbered real property to satisfy funding liability is prohibited transaction

Article Abstract:

The US Supreme Court held in Commissioner v. Keystone Consolidated Industries that satisfying an employer funding obligation by transferring unencumbered property to a defined benefit plan was a prohibited transaction subject to excise taxation under IRC 4975. The issue was deciding whether the transfer constituted a sale or exchange, and the Court felt that since the rest of the Code held that a transfer of property in satisfaction of a monetary obligation was a sale or exchange, then that was what they were dealing with here and an excise tax was in order.

Cases, Pension funds, Excise taxes, Excise tax

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Circuits divide on prohibited transaction implications of contribution of unencumbered property to defined benefit plans

Article Abstract:

The 4th and 5th Circuits disagree on whether the contribution of unencumbered property to a defined benefit pension plan to satisfy an employer's minimum funding liability is a prohibited transaction. The 4th Circuit held that this was a prohibited transaction, noting that Congress' intent with the law was to avoid over-valuations of property adversely affecting the financial health of a plan. The 5th Circuit held that IRC 4971 already prevents this kind of abuse by taxing funding deficiencies from contributions of over-valued assets.

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Use of in-house investment management services raises fiduciary, prohibited transaction concerns for corporate sponsor of master trust

Article Abstract:

The Labor Department (DOL) issued advisory opinion 93-06A in response to a request by Allied Signal Inc (ASI) on rules for the provision of intra-corporate investment management services. ASI's investment department does some unpaid investment management tasks for the defined benefit plans maintained by the company. DOL ruled that reasonable in-house investment services would be exempt from ERISA 408(b)(2) prohibited transaction restrictions and would not constitute fiduciary self-dealing.

Management

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