Who are disqualified parties?

Many of the prohibited transactions are the result of a very simple equation: Plan (or plan asset) + Disqualified person = Prohibited Transaction A plan is defined to include tax-qualified plans, IRAs and other tax favored arrangements. For the complete definition you can reference IRC 4975(e) (1). A disqualified person (IRC 4975(e) (2)) is defined as:

  • The IRA owner
  • The IRA owner’s spouse
  • Ancestors (Mom, Dad, Grandparents)
  • Lineal Descendents (daughters, sons, grandchildren)
  • Spouses of Lineal Descendents (son or daughter-in-law)
  • Investment advisors
  • Fiduciaries – those providing services to the plan
  • Any business entity i.e., LLC, Corp, Trust or Partnership in which any of the disqualified persons mentioned above has a 50% or greater interest.