Prohibited Transactions (Plans & IRAs)
Self-dealing between a plan or IRA and a disqualified person.
What is Prohibited Transactions (Plans & IRAs)?
Plans cannot buy from, sell to, or lend to parties in interest such as fiduciaries and the employer, and fiduciaries cannot use plan assets for their own benefit. An IRA owner cannot borrow from the IRA, pledge it as collateral for a loan, or sell property to it. IRAs also cannot hold life insurance or most collectibles (certain US-minted coins and bullion excepted).
Prohibited Transactions (Plans & IRAs): a worked example
Using an IRA as collateral for a loan makes the pledged portion a taxable distribution.
More terms in Retirement Plans, Accounts & Trading
IRA Rollovers vs. Transfers
60-day rollovers are limited to one a year; direct transfers are unlimited.
10% Early Withdrawal Penalty & Exceptions
Distributions before 59 1/2 cost 10% extra, unless an exception applies.
Solo 401(k)
A 401(k) for a self-employed owner with no employees other than a spouse.
Defined Benefit Plan
A pension promising a specific benefit; the employer bears the investment risk.
Defined Contribution Plan
An individual account plan whose payout depends on contributions and returns.
403(b) Plan
A salary-deferral plan for public schools and 501(c)(3) nonprofits.
457 Plan
Deferred compensation for state and local government employees.
SIMPLE IRA
A low-cost plan for employers with 100 or fewer employees.
All Retirement Plans, Accounts & Trading terms · Full glossary