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CCH® PENSION — 11/23/09

Grant by IRA owner of security interest in non-IRA assets would be prohibited transaction, EBSA advises

The Employee Benefits Security Administration (EBSA) in ERISA Opinion Letter 2009-03A has advised that the grant by an IRA owner to a brokerage firm of a security interest in his non-IRA accounts in order to cover indebtedness of, or arising from, his IRA, would be a prohibited transaction under Code Sec. 4975(c)(1)(B).

Advice was sought on whether it would be a prohibited transaction for an IRA owner to grant to a brokerage firm a security interest in the assets of his non-IRA accounts held by the broker as a requirement for establishing an IRA with the broker. In an opinion letter, EBSA said that the grant of a security interest in the assets of the IRA owner's personal accounts to the broker to cover the IRA's debts to the broker is "akin to a guarantee of such debts by the IRA owner." This would amount to an extension of credit from the IRA owner to the IRA in violation of Code Sec. 4975(c)(1)(B), EBSA advised.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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