Who is prohibited from doing business with 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 party-in-interest
• 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.

There are a number of exceptions (exemptions) in the law that provide protections for the plan in conducting necessary transactions that would otherwise be prohibited. The Labor Department may grant additional exemptions.

Exemptions are provided in the law for many dealings with banks, insurance companies, and other financial institutions that are essential to the on-going operations of the plan. One exemption in the law 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.

Another important exemption - and a popular feature of most plans - permits plans to offer loans to participants. The loans, which are considered investments of the plan, must be available to all participants on a reasonably equivalent basis, must be made according to the provisions in the plan, and must charge a reasonable rate of interest and be adequately secured.