Plan Sponsors may consider contributing non-cash assets into the Plan; typical non-cash contributions include corporate shares and real-estate assets. However, if you’re considering such contributions, be alert as they may trigger prohibited transactions under Section 406(a) of the Employee Retirement Income Security Act of 1974 (ERISA), and consequently bring forth excise taxes to your plan.
For defined benefit plans (such as a pension plan), most non-cash contributions are prohibited transactions, unless they’re provided under ERISA Section 408(g) as statutory exemptions. Be cautious if you intend to utilize non-cash contributions to meet the plan’s minimum annual contribution requirement – the rules set under such statutory exemptions are generally strict and difficult to meet.
If for any reason you have to make such contributions, but your contribution doesn’t qualify under the statutory exemptions, you might still consider whether the transaction falls under a class exemption as authorized by ERISA and granted by DOL. In addition, you might apply for an individual exemption from DOL. If you have any questions on contributing non-cash assets into your plan, contact us anytime for assistance.
Michelle Brumfield,CPA serves as the Employee Benefit Plan Audit and Compliance Director. She has the unique experience required for managing numerous employee benefit plan audits and consulting with both publicly held and privately owned employee benefit plan sponsors. Michelle has over 22 years of experience in accounting and financial audits for a variety of industries and employee benefit plans. This includes defined contribution plans, defined benefit plans, health and welfare plans with a section 401(h) arrangement, and master trust investment accounts. Connect with Michelle on Twitter or LinkedIn.