Question

Section 406 of ERISA prohibits making loans between a plan and a party-in-interest. Which of the following authorizes a plan to offer participant loans?

1) Statutory exemption in section 408 of ERISA.
2) Prohibited Transaction Class Exemption granted by the DOL.
3) Interpretations set forth in DOL Advisory Opinion #97-15A.
4) Each plan that chooses to offer participant loans must first request an Individual Prohibited Transaction Exemption from the DOL.

Answer 1

The Prohibited Transaction Class Exemption granted by the DOL authorizes a plan to offer participant loans.

Step-by-step explanation:

The correct answer is option 2) Prohibited Transaction Class Exemption granted by the DOL. This exemption allows a plan to offer participant loans under specific conditions and within certain limits.

Option 1) Statutory exemption in section 408 of ERISA does not authorize participant loans. Section 408 covers other types of exemptions, but not participant loans.

Option 3) Interpretations set forth in DOL Advisory Opinion #97-15A may provide guidance, but it does not directly authorize participant loans. The opinion clarifies certain requirements, but the exemption itself is granted through the Prohibited Transaction Class Exemption.

Option 4) Each plan that chooses to offer participant loans does not need to request an Individual Prohibited Transaction Exemption from the DOL. The Prohibited Transaction Class Exemption allows plans to offer participant loans without needing an individual exemption.