a-02-31.pdf

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Part IV. --- Items of General Interest

Prohibited Transactions - Proposed Class Exemption and the Voluntary Fiduciary
Correction Program

Announcement 2002-31

On March 15, 2000, the U.S. Department of Labor (the "DOL") published at 65
Fed.
Reg.
14164, its interim Voluntary Fiduciary Correction ("VFC") program. The DOL has adopted
its permanent VFC program. In conjunction with that program, the DOL, which, generally, has
the authority to determine whether a transaction is prohibited under
§
4975 of the Internal
Revenue Code, published a notice of a proposed class exemption (Application No. D-10933)
from the prohibited transaction rules pertaining to four of the enumerated transactions that
come under the VFC program.
The proposed class exemption when finalized will provide relief from the sanctions of
§
4975 (a) and (b) of the Internal Revenue Code, i.e., the application of the excise taxes
described therein applied as a result of § 4975(c)(1)(A) through (E),
1
with respect to the four
enumerated transactions. Among the conditions for an applicant to be eligible for the proposed
class exemption are the following: (1) meeting the requirements of the VFC program pertaining
to the particular transaction, (2) receiving a no action letter from the DOL regarding the
transaction, and (3) providing notice to all interested persons.
The Service recognizes that a disqualified person who meets the conditions described in
the proposed class exemption could nevertheless be subject to the sanctions of § 4975 during
the pendency of the proposed class exemption despite the fact that the proposed class
exemption when finalized will cause those sanctions not to apply with respect to the

1
The prohibited transactions described in § 4975(c)(1)(F), i.e., the receipt of any consideration for his or
her 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, does not come within the
framework of the DOL's proposed class exemption or this announcement.

2

transactions enumerated in the class exemption (assuming all of the conditions of the class
exemption are met). In order to encourage fiduciaries that meet the terms of the proposed
class exemption to participate in the DOL's VFC program and to remove a significant
disincentive from participating in that program, the Service will not seek to impose the § 4975
(a) and (b) excise taxes with respect to any prohibited transaction that is covered by the
proposed class exemption notwithstanding any subsequent changes to the proposed class
exemption when it is finalized, provided that all of the requirements specified in the proposed
class exemption are met.
Drafting Information
The principal author of this announcement is Michael Rubin of the Tax Exempt and
Government Entities Division, Employee Plans. For further information regarding this
announcement, please contact the Employee Plans’ taxpayer assistance telephone service at
1-877-829-5500 (a toll-free number), between the hours of 8:00 a.m. and 6:30 p.m. Eastern
Time, Monday through Friday. Mr. Rubin can be contacted at 202-283-9888 (not a toll-free
number).