ERISA Compliance: Are there some transactions that are prohibited?

        ERISA Compliance: Fiduciary Responsibilities


Certain transactions are prohibited under ERISA to prevent dealings with parties who may be in a position to exercise improper influence over the plan. In addition, fiduciaries are prohibited from engaging in self-dealing and must avoid conflicts of interest that could harm the plan.

Prohibited parties (called parties-in-interest) include the employer, the union, plan fiduciaries, service providers and statutorily defined owners, officers and relatives of parties-in-interest. Some of the prohibited transactions are:

     • A sale, exchange or lease between the plan and party-in-interest

     • Lending money or other extension of credit between the plan and

     • Furnishing goods, services or facilities between the plan and party-in-interest

Other prohibitions relate solely to fiduciaries who use the plan’s assets in their own interest or who act on both sides of a transaction involving a plan. Fiduciaries cannot receive money or any other consideration for their personal account from any party doing business with the plan related to that business.

ERISA includes a number of exemptions that provide protections for the plan in conducting necessary transactions that would otherwise be prohibited. The DOL has authority to grant additional exemptions. ERISA includes exemptions for many dealings that are essential to the ongoing operations of the plan. One of these exemptions allows the plan to hire a service provider as long as the services are necessary to operate the plan and the contract or arrangement under which the services are provided and the compensation paid for those services is reasonable.

The exemptions issued by the DOL can involve transactions available to a class of plans or to one specific plan. Both class and individual exemptions are available on the DOL’s webpage for technical guidance for employee benefit plans. More information on applying for an exemption is available in the DOL’s Exemption Procedures under Federal Pension Law. This publication and the procedures also apply to group health plans.

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for employee benefit plans maintained by private-sector employers. ERISA includes requirements for both retirement plans (for example, 401(k) plans) and welfare benefit plans (for example, group health plans). ERISA has been amended many times over the years, expanding the protections available to welfare benefit plan participants and beneficiaries.

ERISA includes standards of conduct for those who manage an employee benefit plan and its assets, who are called “fiduciaries.” This Legislative Brief includes a set of frequently asked questions (FAQs) to help employers understand the basic fiduciary responsibilities applicable to group health plans under ERISA.