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August 24, 1989
TO: PENSION COMMITTEE NO. 4-89
RE: INSTITUTE LETTER TO DEPARTMENT OF LABOR CONCERNING
IRA PREMIUMS
__________________________________________________________
As we previously advised, the Department of Labor recently
issued an advisory opinion that concluded that an IRA
participant's receipt of free checking account services from a
bank based upon his maintaining his IRA at the bank would
constitute a prohibited transaction under section 4975(c)(1) of
the Internal Revenue Code. (See Institute Memorandum to Pension
Members No. 36-89, dated August 1, 1989.)
Attached is a copy of an Institute letter to the Department
of Labor, concurring in the analysis set forth in the advisory
opinion. The letter notes that the Department's conclusion is
completely consistent with the analysis upon which a 1983
proposed class exemption from the prohibited transaction
provisions for certain premiums and gifts was based. (See
Institute Memorandum to Pension Members No. 5-83, dated February
8, 1983.) The Institute's letter also reasserts the opposition
to the proposed class exemption originally expressed in its 1983
comment letter. (See Institute Memorandum to Pension Members No.
33-83, dated October 3, 1983.)
We will keep you informed of further developments.
Kathy D. Ireland
Assistant General Counsel
Attachment