26 U.S.C. § 4975: Tax on prohibited transactions

There is hereby imposed a tax on each prohibited transaction. The rate of tax shall be equal to 15 percent of the amount involved with respect to the prohibited transaction for each year (or part thereof) in the taxable period. The tax imposed by this subsection shall be paid by any disqualified person who participates in the prohibited transaction (other than a fiduciary acting only as such). In any case in which an initial tax is imposed by subsection (a) on a prohibited transaction and the transaction is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of the amount involved. The tax imposed by this subsection shall be paid by any disqualified person who participated in the prohibited transaction (other than a fiduciary acting only as such). sale or exchange, or leasing, of any property between a plan and a disqualified person; lending of money or other extension of credit between a plan and a disqualified person; furnishing of goods, services, or facilities between a plan and a disqualified person; transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan; act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account; or receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan. administratively feasible, in the interests of the plan and of its participants and beneficiaries, and protective of the rights of participants and beneficiaries of the plan. An individual for whose benefit an individual retirement account is established and his beneficiaries shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be an individual retirement account by reason of the application of section 408(e)(2)(A) or if section 408(e)(4) applies to such account. An individual for whose benefit an Archer MSA (within the meaning of section 220(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 220(e)(2) applies to such transaction. An individual for whose benefit a Coverdell education savings account is established and any contributor to such account shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 530(d) applies with respect to such transaction. An individual for whose benefit a health savings account (within the meaning of section 223(d)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be a health savings account by reason of the application of section 223(e)(2) to such account. Any party to an arrangement which satisfies the requirements of section 408(h) of the Employee Retirement Income Security Act of 1974 shall be exempt from the tax imposed by this section with respect to such arrangement. is available to all such participants or beneficiaries on a reasonably equivalent basis, is not made available to highly compensated employees (within the meaning of section 414(q)) in an amount greater than the amount made available to other employees, is made in accordance with specific provisions regarding such loans set forth in the plan, bears a reasonable rate of interest, and is adequately secured; any contract, or reasonable arrangement, made with a disqualified person for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor; such loan is primarily for the benefit of participants and beneficiaries of the plan, and such loan is at a reasonable rate of interest, and any collateral which is given to a disqualified person by the plan consists only of qualifying employer securities (as defined in subsection (e)(8)); the plan covers only employees of such bank or other institution and employees of affiliates of such bank or other institution, or such investment is expressly authorized by a provision of the plan or by a fiduciary (other than such bank or institution or affiliates thereof) who is expressly empowered by the plan to so instruct the trustee with respect to such investment; the employer maintaining the plan, or a disqualified person which is wholly owned (directly or indirectly) by the employer establishing the plan, or by any person which is a disqualified person with respect to the plan, but only if the total premiums and annuity considerations written by such insurers for life insurance, health insurance, or annuities for all plans (and their employers) with respect to which such insurers are disqualified persons (not including premiums or annuity considerations written by the employer maintaining the plan) do not exceed 5 percent of the total premiums and annuity considerations written for all lines of insurance in that year by such insurers (not including premiums or annuity considerations written by the employer maintaining the plan); such bank or similar financial institution has adopted adequate internal safeguards which assure that the provision of such ancillary service is consistent with sound banking and financial practice, as determined by Federal or State supervisory authority, and in an excessive or unreasonable manner, and in a manner that would be inconsistent with the best interests of participants and beneficiaries of employee benefit plans; the exercise of a privilege to convert securities, to the extent provided in regulations of the Secretary, but only if the plan receives no less than adequate consideration pursuant to such conversion; the transaction is a sale or purchase of an interest in the fund, the bank, trust company, or insurance company receives not more than a reasonable compensation, and such transaction is expressly permitted by the instrument under which the plan is maintained, or by a fiduciary (other than the bank, trust company, or insurance company, or an affiliate thereof) who has authority to manage and control the assets of the plan; receipt by a disqualified person of any benefit to which he may be entitled as a participant or beneficiary in the plan, so long as the benefit is computed and paid on a basis which is consistent with the terms of the plan as applied to all other participants and beneficiaries; receipt by a disqualified person of any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred, in the performance of his duties with the plan, but no person so serving who already receives full-time pay from an employer or an association of employers, whose employees are participants in the plan or from an employee organization whose members are participants in such plan shall receive compensation from such fund, except for reimbursement of expenses properly and actually incurred; service by a disqualified person as a fiduciary in addition to being an officer, employee, agent, or other representative of a disqualified person; the making by a fiduciary of a distribution of the assets of the trust in accordance with the terms of the plan if such assets are distributed in the same manner as provided under section 4044 of title IV of the Employee Retirement Income Security Act of 1974 (relating to allocation of assets); any transaction which is exempt from section 406 of such Act by reason of section 408(e) of such Act (or which would be so exempt if such section 406 applied to such transaction) or which is exempt from section 406 of such Act by reason of section 408(b)(12) of such Act; any transaction required or permitted under part 1 of subtitle E of title IV or section 4223 of the Employee Retirement Income Security Act of 1974, but this paragraph shall not apply with respect to the application of subsection (c)(1) (E) or (F); a merger of multiemployer plans, or the transfer of assets or liabilities between multiemployer plans, determined by the Pension Benefit Guaranty Corporation to meet the requirements of section 4231 of such Act, but this paragraph shall not apply with respect to the application of subsection (c)(1)(E) or (F); such stock is in a bank (as defined in section 581) or a depository institution holding company (as defined in section 3(w)(1) of the Federal Deposit Insurance Act ( 12 U.S.C. 1813(w)(1) )), such stock is held by such trust as of the date of the enactment of this paragraph, such sale is pursuant to an election under section 1362(a) by such bank or company, such sale is for fair market value at the time of sale (as established by an independent appraiser) and the terms of the sale are otherwise at least as favorable to such trust as the terms that would apply on a sale to an unrelated party, such trust does not pay any commissions, costs, or other expenses in connection with the sale, and the stock is sold in a single transaction for cash not later than 120 days after the S corporation election is made; the provision of the investment advice to the participant or beneficiary of the plan with respect to a security or other property available as an investment under the plan, the acquisition, holding, or sale of a security or other property available as an investment under the plan pursuant to the investment advice, or the direct or indirect receipt of fees or other compensation by the fiduciary adviser or an affiliate thereof (or any employee, agent, or registered representative of the fiduciary adviser or affiliate) in connection with the provision of the advice or in connection with an acquisition, holding, or sale of a security or other property available as an investment under the plan pursuant to the investment advice; and the requirements of subsection (f)(8) are met, 1 1 So in original. The comma probably should be a semicolon. the transaction involves a block trade, at the time of the transaction, the interest of the plan (together with the interests of any other plans maintained by the same plan sponsor), does not exceed 10 percent of the aggregate size of the block trade, the terms of the transaction, including the price, are at least as favorable to the plan as an arm’s length 2 transaction, and 2 So in original. Probably should be “arm’s-length”. the compensation associated with the purchase and sale is not greater than the compensation associated with an arm’s length 2 transaction with an unrelated party, 1 the applicable Federal regulating entity, or such foreign regulatory entity as the Secretary of Labor may determine by regulation, the transaction is effected pursuant to rules designed to match purchases and sales at the best price available through the execution system in accordance with applicable rules of the Securities and Exchange Commission or other relevant governmental authority, or neither the execution system nor the parties to the transaction take into account the identity of the parties in the execution of trades, the price and compensation associated with the purchase and sale are not greater than the price and compensation associated with an arm’s length 2 transaction with an unrelated party, if 3 the disqualified person has an ownership interest in the system or venue described in subparagraph (A), the system or venue has been authorized by the plan sponsor or other independent fiduciary for transactions described in this paragraph, and 3 So in original. The word “if” probably should not appear. not less than 30 days prior to the initial transaction described in this paragraph executed through any system or venue described in subparagraph (A), a plan fiduciary is provided written or electronic notice of the execution of such transaction through such system or venue, 1 transactions described in subparagraphs (A), (B), and (D) of subsection (c)(1) between a plan and a person that is a disqualified person other than a fiduciary (or an affiliate) who has or exercises any discretionary authority or control with respect to the investment of the plan assets involved in the transaction or renders investment advice (within the meaning of subsection (e)(3)(B)) with respect to those assets, solely by reason of providing services to the plan or solely by reason of a relationship to such a service provider described in subparagraph (F), (G), (H), or (I) of subsection (e)(2), or both, but only if in connection with such transaction the plan receives no less, nor pays no more, than adequate consideration, 1 the transaction is in connection with the purchase, holding, or sale of securities or other investment assets (other than a foreign exchange transaction unrelated to any other investment in securities or other investment assets), at the time the foreign exchange transaction is entered into, the terms of the transaction are not less favorable to the plan than the terms generally available in comparable arm’s length 2 foreign exchange transactions between unrelated parties, or the terms afforded by the bank or broker-dealer (or any affiliate of either) in comparable arm’s-length foreign exchange transactions involving unrelated parties, the exchange rate used by such bank or broker-dealer (or affiliate) for a particular foreign exchange transaction does not deviate by more than 3 percent from the interbank bid and asked rates for transactions of comparable size and maturity at the time of the transaction as displayed on an independent service that reports rates of exchange in the foreign currency market for such currency, and the bank or broker-dealer (or any affiliate of either) does not have investment discretion, or provide investment advice, with respect to the transaction, 1 the transaction is a purchase or sale, for no consideration other than cash payment against prompt delivery of a security for which market quotations are readily available, the transaction is effected at the independent current market price of the security (within the meaning of section 270.17a–7(b) of title 17, Code of Federal Regulations), no brokerage commission, fee (except for customary transfer fees, the fact of which is disclosed pursuant to subparagraph (D)), or other remuneration is paid in connection with the transaction, a fiduciary (other than the investment manager engaging in the cross-trades or any affiliate) for each plan participating in the transaction authorizes in advance of any cross-trades (in a document that is separate from any other written agreement of the parties) the investment manager to engage in cross trades at the investment manager’s discretion, after such fiduciary has received disclosure regarding the conditions under which cross trades may take place (but only if such disclosure is separate from any other agreement or disclosure involving the asset management relationship), including the written policies and procedures of the investment manager described in subparagraph (H), each plan participating in the transaction has assets of at least $100,000,000, except that if the assets of a plan are invested in a master trust containing the assets of plans maintained by employers in the same controlled group (as defined in section 407(d)(7) of the Employee Retirement Income Security Act of 1974), the master trust has assets of at least $100,000,000, the investment manager provides to the plan fiduciary who authorized cross trading under subparagraph (D) a quarterly report detailing all cross trades executed by the investment manager in which the plan participated during such quarter, including the following information, as applicable: (i) the identity of each security bought or sold; (ii) the number of shares or units traded; (iii) the parties involved in the cross-trade; and (iv) trade price and the method used to establish the trade price, the investment manager does not base its fee schedule on the plan’s consent to cross trading, and no other service (other than the investment opportunities and cost savings available through a cross trade) is conditioned on the plan’s consent to cross trading, the investment manager has adopted, and cross-trades are effected in accordance with, written cross-trading policies and procedures that are fair and equitable to all accounts participating in the cross-trading program, and that include a description of the manager’s pricing policies and procedures, and the manager’s policies and procedures for allocating cross trades in an objective manner among accounts participating in the cross-trading program, and the investment manager has designated an individual responsible for periodically reviewing such purchases and sales to ensure compliance with the written policies and procedures described in subparagraph (H), and following such review, the individual shall issue an annual written report no later than 90 days following the period to which it relates signed under penalty of perjury to the plan fiduciary who authorized cross trading under subparagraph (D) describing the steps performed during the course of the review, the level of compliance, and any specific instances of non-compliance. except as provided in subsection (f)(11), a transaction described in subparagraph (A), (B), (C), or (D) of subsection (c)(1) in connection with the acquisition, holding, or disposition of any security or commodity, if the transaction is corrected before the end of the correction period, 1 the provision of a de minimis financial incentive described in section 401(k)(4)(A), 1 or the receipt of fees and compensation by the automatic portability provider for services provided in connection with an automatic portability transaction. a trust described in section 401(a) which forms a part of a plan, or a plan described in section 403(a), which trust or plan is exempt from tax under section 501(a), an individual retirement account described in section 408(a), an individual retirement annuity described in section 408(b), an Archer MSA described in section 220(d), a health savings account described in section 223(d), a Coverdell education savings account described in section 530, or a trust, plan, account, or annuity which, at any time, has been determined by the Secretary to be described in any preceding subparagraph of this paragraph. a fiduciary; a person providing services to the plan; an employer any of whose employees are covered by the plan; an employee organization any of whose members are covered by the plan; the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation, the capital interest or the profits interest of a partnership, or the beneficial interest of a trust or unincorporated enterprise, a member of the family (as defined in paragraph (6)) of any individual described in subparagraph (A), (B), (C), or (E); the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of such corporation, the capital interest or profits interest of such partnership, or the beneficial interest of such trust or estate, an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G); or a 10 percent or more (in capital or profits) partner or joint venturer of a person described in subparagraph (C), (D), (E), or (G). exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or has any discretionary authority or discretionary responsibility in the administration of such plan. For purposes of paragraphs (2)(E)(i) and (G)(i) there shall be taken into account indirect stockholdings which would be taken into account under section 267(c), except that, for purposes of this paragraph, section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of paragraph (6). For purposes of paragraphs (2)(E)(ii) and (iii), (G)(ii) and (iii), and (I) the ownership of profits or beneficial interests shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of paragraph (6). For purposes of paragraph (2)(F), the family of any individual shall include his spouse, ancestor, lineal descendant, and any spouse of a lineal descendant. which is a stock bonus plan which is qualified, or a stock bonus and a money purchase plan both of which are qualified under section 401(a), and which are designed to invest primarily in qualifying employer securities; and which is otherwise defined in regulations prescribed by the Secretary. The term “qualifying employer security” means any employer security within the meaning of section 409( l ). If any moneys or other property of a plan are invested in shares of an investment company registered under the Investment Company Act of 1940, the investment shall not cause that investment company or that investment company’s investment adviser or principal underwriter to be treated as a fiduciary or a disqualified person for purposes of this section, except when an investment company or its investment adviser or principal underwriter acts in connection with a plan covering employees of the investment company, its investment adviser, or its principal underwriter. The term “plan” includes a trust described in section 501(c)(22). In the case of any trust to which this section applies by reason of subparagraph (A), the term “disqualified person” includes any person who is a disqualified person with respect to any plan to which such trust is permitted to make payments under section 4223 of the Employee Retirement Income Security Act of 1974. If more than one person is liable under subsection (a) or (b) with respect to any one prohibited transaction, all such persons shall be jointly and severally liable under such subsection with respect to such transaction. the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212, the date on which the tax imposed by subsection (a) is assessed, or the date on which correction of the prohibited transaction is completed. A transfer or real or personal property by a disqualified person to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan assumes or if it is subject to a mortgage or similar lien which a disqualified person placed on the property within the 10-year period ending on the date of the transfer. in the case of the tax imposed by subsection (a), shall be determined as of the date on which the prohibited transaction occurs; and in the case of the tax imposed by subsection (b), shall be the highest fair market value during the taxable period. The terms “correction” and “correct” mean, with respect to a prohibited transaction, undoing the transaction to the extent possible, but in any case placing the plan in a financial position not worse than that in which it would be if the disqualified person were acting under the highest fiduciary standards. lends any part of the corpus or income of the plan to, pays any compensation for personal services rendered to the plan to, or acquires for the plan any property from, or sells any property to, A shareholder-employee. A participant or beneficiary of an individual retirement plan (as defined in section 7701(a)(37)). An employer or association of employees which establishes such an individual retirement plan under section 408(c). Subparagraph (A)(iii) shall not apply to a transaction which consists of a sale of employer securities to an employee stock ownership plan (as defined in subsection (e)(7)) by a shareholder-employee, a member of the family (as defined in section 267(c)(4)) of such shareholder-employee, or a corporation in which such a shareholder-employee owns stock representing a 50 percent or greater interest described in subparagraph (A). For purposes of subparagraph (A)(i), the term “owner-employee” shall only include a person described in subclause (II) or (III) of clause (i). For purposes of subparagraph (B), the term “shareholder-employee” means an employee or officer of an S corporation who owns (or is considered as owning within the meaning of section 318(a)(1)) more than 5 percent of the outstanding stock of the corporation on any day during the taxable year of such corporation. A plan shall not be treated as violating the requirements of section 401 or 409 or subsection (e)(7), or as engaging in a prohibited transaction for purposes of subsection (d)(3), merely by reason of any distribution (as described in section 1368(a)) with respect to S corporation stock that constitutes qualifying employer securities, which in accordance with the plan provisions is used to make payments on a loan described in subsection (d)(3) the proceeds of which were used to acquire such qualifying employer securities (whether or not allocated to participants). The preceding sentence shall not apply in the case of a distribution which is paid with respect to any employer security which is allocated to a participant unless the plan provides that employer securities with a fair market value of not less than the amount of such distribution are allocated to such participant for the year which (but for the preceding sentence) such distribution would have been allocated to such participant. The prohibitions provided in subsection (c) shall not apply to transactions described in subsection (d)(17) if the investment advice provided by a fiduciary adviser is provided under an eligible investment advice arrangement. provides that any fees (including any commission or other compensation) received by the fiduciary adviser for investment advice or with respect to the sale, holding, or acquisition of any security or other property for purposes of investment of plan assets do not vary depending on the basis of any investment option selected, or uses a computer model under an investment advice program meeting the requirements of subparagraph (C) in connection with the provision of investment advice by a fiduciary adviser to a participant or beneficiary, and with respect to which the requirements of subparagraphs (D), (E), (F), (G), (H), and (I) are met. An investment advice program meets the requirements of this subparagraph if the requirements of clauses (ii), (iii), and (iv) are met. applies generally accepted investment theories that take into account the historic returns of different asset classes over defined periods of time, utilizes relevant information about the participant, which may include age, life expectancy, retirement age, risk tolerance, other assets or sources of income, and preferences as to certain types of investments, utilizes prescribed objective criteria to provide asset allocation portfolios comprised of investment options available under the plan, operates in a manner that is not biased in favor of investments offered by the fiduciary adviser or a person with a material affiliation or contractual relationship with the fiduciary adviser, and takes into account all investment options under the plan in specifying how a participant’s account balance should be invested and is not inappropriately weighted with respect to any investment option. The requirements of this clause are met with respect to any investment advice program if an eligible investment expert certifies, prior to the utilization of the computer model and in accordance with rules prescribed by the Secretary of Labor, that the computer model meets the requirements of clause (ii). If, as determined under regulations prescribed by the Secretary of Labor, there are material modifications to a computer model, the requirements of this clause are met only if a certification described in subclause (I) is obtained with respect to the computer model as so modified. The term “eligible investment expert” means any person which meets such requirements as the Secretary of Labor may provide and which does not bear any material affiliation or contractual relationship with any investment adviser or a related person thereof (or any employee, agent, or registered representative of the investment adviser or related person). the only investment advice provided under the program is the advice generated by the computer model described in clause (ii), and any transaction described in subsection (d)(17)(A)(ii) occurs solely at the direction of the participant or beneficiary. The requirements of this subparagraph are met with respect to an arrangement if the arrangement is expressly authorized by a plan fiduciary other than the person offering the investment advice program, any person providing investment options under the plan, or any affiliate of either. conducts an annual audit of the arrangement for compliance with the requirements of this paragraph, and following completion of the annual audit, issues a written report to the fiduciary who authorized use of the arrangement which presents its specific findings regarding compliance of the arrangement with the requirements of this paragraph. In the case of a plan described in subparagraphs (B) through (F) (and so much of subparagraph (G) as relates to such subparagraphs) of subsection (e)(1), in lieu of the requirements of clause (i), audits of the arrangement shall be conducted at such times and in such manner as the Secretary of Labor may prescribe. For purposes of this subparagraph, an auditor is considered independent if it is not related to the person offering the arrangement to the plan and is not related to any person providing investment options under the plan. of the role of any party that has a material affiliation or contractual relationship with the fiduciary adviser in the development of the investment advice program and in the selection of investment options available under the plan, of the past performance and historical rates of return of the investment options available under the plan, of all fees or other compensation relating to the advice that the fiduciary adviser or any affiliate thereof is to receive (including compensation provided by any third party) in connection with the provision of the advice or in connection with the sale, acquisition, or holding of the security or other property, of any material affiliation or contractual relationship of the fiduciary adviser or affiliates thereof in the security or other property, of the manner, and under what circumstances, any participant or beneficiary information provided under the arrangement will be used or disclosed, of the types of services provided by the fiduciary adviser in connection with the provision of investment advice by the fiduciary adviser, that the adviser is acting as a fiduciary of the plan in connection with the provision of the advice, and that a recipient of the advice may separately arrange for the provision of advice by another adviser, that could have no material affiliation with and receive no fees or other compensation in connection with the security or other property, and maintains the information described in clause (i) in accurate form and in the manner described in subparagraph (H), provides, without charge, accurate information to the recipient of the advice no less frequently than annually, provides, without charge, accurate information to the recipient of the advice upon request of the recipient, and provides, without charge, accurate information to the recipient of the advice concerning any material change to the information required to be provided to the recipient of the advice at a time reasonably contemporaneous to the change in information. the fiduciary adviser provides appropriate disclosure, in connection with the sale, acquisition, or holding of the security or other property, in accordance with all applicable securities laws, the sale, acquisition, or holding occurs solely at the direction of the recipient of the advice, the compensation received by the fiduciary adviser and affiliates thereof in connection with the sale, acquisition, or holding of the security or other property is reasonable, and the terms of the sale, acquisition, or holding of the security or other property are at least as favorable to the plan as an arm’s length 2 transaction would be. The requirements of this subparagraph are met if the notification required to be provided to participants and beneficiaries under subparagraph (F)(i) is written in a clear and conspicuous manner and in a manner calculated to be understood by the average plan participant and is sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of the information required to be provided in the notification. The Secretary of Labor shall issue a model form for the disclosure of fees and other compensation required in subparagraph (F)(i)(III) which meets the requirements of clause (i). The requirements of this subparagraph are met if a fiduciary adviser who has provided advice referred to in subparagraph (A) maintains, for a period of not less than 6 years after the provision of the advice, any records necessary for determining whether the requirements of the preceding provisions of this paragraph and of subsection (d)(17) have been met. A transaction prohibited under subsection (c) shall not be considered to have occurred solely because the records are lost or destroyed prior to the end of the 6-year period due to circumstances beyond the control of the fiduciary adviser. registered as an investment adviser under the Investment Advisers Act of 1940 ( 15 U.S.C. 80b–1 et seq.) or under the laws of the State in which the fiduciary maintains its principal office and place of business, a bank or similar financial institution referred to in subsection (d)(4) or a savings association (as defined in section 3(b)(1) of the Federal Deposit Insurance Act ( 12 U.S.C. 1813(b)(1) ), but only if the advice is provided through a trust department of the bank or similar financial institution or savings association which is subject to periodic examination and review by Federal or State banking authorities, an insurance company qualified to do business under the laws of a State, a person registered as a broker or dealer under the Securities Exchange Act of 1934 ( 15 U.S.C. 78a et seq.), an affiliate of a person described in any of subclauses (I) through (IV), or an employee, agent, or registered representative of a person described in subclauses (I) through (V) who satisfies the requirements of applicable insurance, banking, and securities laws relating to the provision of the advice. The term “affiliate” of another entity means an affiliated person of the entity (as defined in section 2(a)(3) of the Investment Company Act of 1940 ( 15 U.S.C. 80a–2(a)(3) )). The term “registered representative” of another entity means a person described in section 3(a)(18) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a)(18) ) (substituting the entity for the broker or dealer referred to in such section) or a person described in section 202(a)(17) of the Investment Advisers Act of 1940 ( 15 U.S.C. 80b–2(a)(17) ) (substituting the entity for the investment adviser referred to in such section). The term “block trade” means any trade of at least 10,000 shares or with a market value of at least $200,000 which will be allocated across two or more unrelated client accounts of a fiduciary. the price of the security prevailing on a national securities exchange which is registered under section 6 of the Securities Exchange Act of 1934, taking into account factors such as the size of the transaction and marketability of the security, or if the security is not traded on such a national securities exchange, a price not less favorable to the plan than the offering price for the security as established by the current bid and asked prices quoted by persons independent of the issuer and of the party in interest, taking into account factors such as the size of the transaction and marketability of the security, and in the case of an asset other than a security for which there is a generally recognized market, the fair market value of the asset as determined in good faith by a fiduciary or fiduciaries in accordance with regulations prescribed by the Secretary of Labor. For purposes of subsection (d)(23), the term “correction period” means the 14-day period beginning on the date on which the disqualified person discovers, or reasonably should have discovered, that the transaction would (without regard to this paragraph and subsection (d)(23)) constitute a prohibited transaction. Subsection (d)(23) does not apply to any transaction between a plan and a plan sponsor or its affiliates that involves the acquisition or sale of an employer security (as defined in section 407(d)(1) of the Employee Retirement Income Security Act of 1974) or the acquisition, sale, or lease of employer real property (as defined in section 407(d)(2) of such Act). In the case of any disqualified person, subsection (d)(23) does not apply to a transaction if, at the time the transaction is entered into, the disqualified person knew (or reasonably should have known) that the transaction would (without regard to this paragraph) constitute a prohibited transaction. If a transaction is not treated as a prohibited transaction by reason of subsection (d)(23), then no tax under subsections (a) and (b) shall be assessed with respect to such transaction, and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpayment. The term “security” has the meaning given such term by section 475(c)(2) (without regard to subparagraph (F)(iii) and the last sentence thereof). The term “commodity” has the meaning given such term by section 475(e)(2) (without regard to subparagraph (D)(iii) thereof). to undo the transaction to the extent possible and in any case to make good to the plan or affected account any losses resulting from the transaction, and to restore to the plan or affected account any profits made through the use of assets of the plan. from an individual retirement plan which is established on behalf of an individual and to which amounts were transferred under section 401(a)(31)(B)(i), to an employer-sponsored retirement plan described in clause (iii), (iv), (v), or (vi) of section 402(c)(8)(B) (other than a defined benefit plan) in which such individual is an active participant, and after such individual has been given advance notice of the transfer and has not affirmatively opted out of such transfer. An automatic portability provider is a person, other than an individual, who executes transfers described in clause (i). An automatic portability provider shall acknowledge in writing, at such time and format as specified by the Secretary of Labor, that the provider is a fiduciary with respect to the individual retirement plan described in subparagraph (A)(i)(I). shall not exceed reasonable compensation, and shall be fully disclosed to and approved in writing in advance of the transaction by a plan fiduciary of the plan described in subparagraph (A)(i)(II) which is independent of the automatic portability provider. The automatic portability provider shall not market or sell data relating to the individual retirement plan described in subparagraph (A)(i)(I) or to the participants of the plan described in subparagraph (A)(i)(II). The automatic portability provider shall offer automatic portability transactions on the same terms to any plan described in subparagraph (A)(i)(II). a description of the automatic portability transaction and a complete and accurate statement of all fees which will be charged and all compensation which will be received in connection with the transaction, a clear and prominent description of the individual’s right to affirmatively elect not to participate in the transaction as well as the other available distribution options, the deadline by which the individual must make an election, the procedures for such an election, and a telephone number for the automatic portability provider that the individual may call to make such election, a description of the individual’s right to designate a beneficiary and the procedures to do so, and such other disclosures as the Secretary of Labor may require by regulation. the actions taken by the automatic portability provider with respect to the individual’s account, all relevant information regarding the location and amount of any transferred assets, a statement of fees charged against the account by the automatic portability provider or its affiliates in connection with the transfer, a telephone number at which the individual can contact the automatic portability provider, and such other disclosures as the Secretary of Labor may require by regulation. The notices required under clauses (v) and (vi) shall be written in a manner calculated to be understood by the average person and shall not include inaccurate or misleading statements. The automatic portability provider shall query on at least a monthly basis whether any individual with an individual retirement plan described in subparagraph (A)(i)(I) has an account in a plan described in subparagraph (A)(i)(II). After liquidating the assets of an individual retirement plan described in subparagraph (A)(i)(I) to cash, an automatic portability provider shall transfer the account balance of such plan as soon as practicable to the plan described in subparagraph (A)(i)(II). The automatic portability provider shall neither have nor exercise discretion to affect the timing or amount of the transfer pursuant to an automatic portability transaction other than to deduct the appropriate fees as described in clause (ii). An automatic portability provider shall, for not less than 6 years after the automatic portability transaction has occurred, maintain the records sufficient to demonstrate the terms of this subparagraph have been met. The automatic portability provider shall make such records available to any authorized employee of the Department of the Treasury or the Department of Labor within 30 calendar days of the date of a written request for such records. An automatic portability provider shall conduct an annual audit, in accordance with regulations promulgated by the Secretary of Labor, of automatic portability transactions occurring during the calendar year to demonstrate compliance with this paragraph and any regulations thereunder and identify any instances of noncompliance therewith, and shall submit such audit annually to the Secretary of Labor, in such form and manner as specified by such Secretary. a list of recordkeepers for each plan described in subparagraph (A)(i)(II) with respect to which the provider carries out automatic portability transactions, and a list of all fees described in clause (ii)(II) paid to the provider. in the case of a plan to which a guaranteed benefit policy (as defined in section 401(b)(2)(B) of the Employee Retirement Income Security Act of 1974) is issued, to any assets of the insurance company, insurance service, or insurance organization merely because of its issuance of such policy; to a governmental plan (within the meaning of section 414(d)); or to a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made. Before sending a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary shall notify the Secretary of Labor and provide him a reasonable opportunity to obtain a correction of the prohibited transaction or to comment on the imposition of such tax. For provisions concerning coordination procedures between Secretary of Labor and Secretary of the Treasury with respect to application of tax imposed by this section and for authority to waive imposition of the tax imposed by subsection (b), see section 3003 of the Employee Retirement Income Security Act of 1974. Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 1002, 1108, and 1112 of Title 29, Labor] shall apply to transactions occurring after the date of the enactment of this Act [ Aug. 17, 2006 ]. The amendments made by subsection (b) [amending section 1112 of Title 29 ] shall apply to plan years beginning after such date.” insofar as they make the requirements of subsections (e) and (h)(1)(B) of section 409A [now section 409] of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applicable to section 4975 of such Code, to stock acquired after December 31, 1979 , and insofar as they make paragraphs (1)(A) and (2) of section 409A(h) [now section 409(h)] of such Code applicable to such section 4975, to distributions after December 31, 1978 .” The amendments made by this section [enacting this section and amending section 503 of this title ] shall take effect on January 1, 1975 . If, before the amendments made by this section [enacting this section and amending section 503 of this title ] take effect, an organization described in section 401(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] is denied exemption under section 501(a) of such Code by reason of section 503 of such Code, the denial of such exemption shall not apply if the disqualified person elects (in such manner and at such time as the Secretary or his delegate shall by regulations prescribe) to pay, with respect to the prohibited transaction (within the meaning of section 503(b) or (g)) which resulted in such denial of exemption, a tax in the amount and in the manner provided with respect to the tax imposed under section 4975 of such Code. An election made under this subparagraph, once made, shall be irrevocable. The Secretary of the Treasury or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph. a loan of money or other extension of credit between a plan and a disqualified person under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984 , if such loan or other extension of credit remains at least as favorable to the plan as an arm’s-length transaction with an unrelated party would be, and if the execution of the contract, the making of the loan, or the extension of credit was not, at the time of such execution, making, or extension, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law); a lease of joint use of property involving the plan and a disqualified person pursuant to a binding contract in effect on July 1, 1974 (or pursuant to renewals of such a contract), until June 30, 1984 , if such lease or joint use remains at least as favorable to the plan as an arm’s-length transaction with an unrelated party would be and if the execution of the contract was not, at the time of such execution, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law; in the case of a sale, exchange, or other disposition of the property by the plan to the disqualified person, the plan receives an amount which is not less than the fair market value of the property at the time of such disposition; and in the case of the acquisition of the property by the plan, the plan pays an amount which is not in excess of the fair market value of the property at the time of such acquisition: Until June 30, 1977 , the provision of services to which subparagraphs (A), (B), and (C) do not apply between a plan and a disqualified person (i) under a binding contract in effect on July 1, 1974 (or pursuant to renewals of such contract), or (ii) if the disqualified person ordinarily and customarily furnished such services on June 30, 1974 , if such provision of services remains at least as favorable to the plan as an arm’s-length transaction with an unrelated party would be and if the provision of services was not, at the time of such provision, a prohibited transaction (within the meaning of section 503(b) of such Code) or the corresponding provisions of prior law; or the sale, exchange, or other disposition of property which is owned by a plan on June 30, 1974 , and all times thereafter, to a disqualified person, if such plan is required to dispose of such property in order to comply with the provisions of section 407(a)(2)(A) (relating to the prohibition against holding excess employer securities and employer real property) of the Employee Retirement Income Security Act of 1974 [ 29 U.S.C. 1107(a)(2) ] and if the plan receives not less than adequate consideration. require an automatic portability provider to provide a notice to individuals on whose behalf the individual retirement plan described in paragraph (12)(A)(i)(I) of section 4975(f) of the Internal Revenue Code of 1986, as added by this section, is established in advance of the notices specified in paragraph (12)(B)(v) of such section, as so added, require an automatic portability provider to disclose to plans described in paragraph (12)(A)(i)(II) of section 4975(f) of the Internal Revenue Code of 1986, as added by this section, information required to be provided by a covered service provider pursuant to section 2550.408b–2(c) of title 29, Code of Federal Regulations, require a plan described in such paragraph (12)(A)(i)(II), as so added, to fully disclose fees related to an automatic portability transaction in its summary plan description or summary of material modifications, as relevant, require a plan described in such paragraph, as so added, to invest amounts received on behalf of a participant pursuant to an automatic portability transaction in the participant’s current investment election under the plan or, if no election is made or permitted, in the plan’s qualified default investment alternative (within the meaning of section 2550.404c–5 of title 29, Code of Federal Regulations) or another investment selected by a fiduciary with respect to such plan, prohibit or restrict the receipt or payment of third party compensation (other than a direct fee paid by a plan sponsor which is in lieu of a fee imposed on an individual retirement plan owner) by an automatic portability provider in connection with an automatic portability transaction, prohibit exculpatory provisions in an automatic portability provider’s contracts or communications with individuals disclaiming or limiting its liability in the event that an automatic portability transaction results in an improper transfer, require an automatic portability provider to take actions necessary to reasonably ensure that participant and beneficiary data is current and accurate, limit the use of data related to automatic portability transactions for any purpose other than the execution of such transactions or locating missing participants, except as permitted by the Secretary of Labor, provide for corrections procedures in the event an auditor determines the automatic portability provider was not in compliance with this provision and related regulations as specified in paragraph (12)(B)(ix)(II) [probably should be “(12)(B)(xi)(II)”] of section 4975(f) of such Code, as so added, including deadlines, supplemental audits, and corrective actions which may include a temporary prohibition from relying on the exemption provided by paragraph (25) of section 4975(d) of such Code, as added by this section, ensure that the appropriate participants and beneficiaries, in fact, receive all the required notices and disclosures, and make clear that the exemption provided by paragraph (25) of section 4975(d) of such Code, as added by this section, applies solely to the automatic portability transactions described therein, and, to the extent the Secretary deems necessary or advisable, specify how the application of the exemption relates to or coordinates with the application of other statutory provisions, regulations, administrative guidance, or exemptions. the number of automatic cash outs from qualified plans to individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code, the number of completed automatic portability transactions to employer-sponsored retirement plans described in section 4975(f)(12)(A)(i)(II) of such Code, the number of individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code which have been transferred to designated beneficiaries, the number of individual retirement plans described in section 4975(f)(12)(A)(i)(I) of such Code for which the automatic portability provider is searching for next of kin due to a deceased account holder without a designated beneficiary, and the number of accounts that were reduced to a zero balance while in the automatic portability provider’s custody; a summary of any consumer complaints submitted to the Employee Benefits Security Administration regarding automatic portability transactions; a summary of compliance issues found in the annual audit described in section 4975(f)(12)(B)(xiii)(II) [probably should be “4975(f)(12)(B)(xi)(II)”] of such Code, if any, and their corrections; a summary of the fees individuals are charged in connection with automatic portability transactions, including whether those fees have increased since the last report; recommendations of any necessary statutory changes to this exemption to improve the effectiveness of automatic portability transactions, including repeal of this provision in the event of a pattern of noncompliance; and any other information the Secretary of Labor deems important. Not later than 2 years after the date of the enactment of this Act [ Dec. 29, 2022 ], the Secretary of Treasury shall report to the Committee on Finance of the Senate and the Committee on Ways and Means on the adequacy of the notices relating to transfers under section 401(a)(31)(B)(i) of the Internal Revenue Code of 1986.” at least the top 50 trustees of such plans, determined on the basis of assets held by such trustees, and other persons offering computer model investment advice programs based on nonproprietary products, and shall on the basis of such information make the determination under subparagraph (B). utilizes relevant information about the account beneficiary, which may include age, life expectancy, retirement age, risk tolerance, other assets or sources of income, and preferences as to certain types of investments, takes into account the full range of investments, including equities and bonds, in determining the options for the investment portfolio of the account beneficiary, and allows the account beneficiary, in directing the investment of assets, sufficient flexibility in obtaining advice to evaluate and select investment options. Subclause (II) of section 4975(f)(8)(B)(i) of the Internal Revenue Code of 1986 shall not apply to a plan described in subparagraph (A)(i). If the Secretary of Labor determines under subparagraph (B) or (D) that there is a computer model investment advice program described in subparagraph (B), subclause (I) shall cease to apply as of the date of such determination. ensure the requirements of sections 4975(d)(17) and 4975(f)(8) (other than subparagraph (C) thereof) of the Internal Revenue Code of 1986 are met, and ensure the investment advice provided under the investment advice program utilizes prescribed objective criteria to provide asset allocation portfolios comprised of securities or other property available as investments under the plan. the date which is 2 years after such subsequent determination, or the date which is 3 years after the first date on which such exemption took effect. Any person may request the Secretary of Labor to make a determination under this subparagraph with respect to any computer model investment advice program, and the Secretary of Labor shall make a determination with respect to such request within 90 days. If the Secretary of Labor makes a determination that such program is not described in subparagraph (B), the Secretary shall, within 10 days of such determination, notify the Committee on Ways and Means and the Committee on Education and the Workforce of the House of Representatives and the Committee on Finance and the Committee on Health, Education, Labor, and Pensions of the Senate of such determination and the reasons for such determination. The provisions of this paragraph shall take effect on the date of the enactment of this Act [ Aug. 17, 2006 ].”