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Party In Interest Transactions

Party-in-Interest Transactions

Definition

Otherwise legitimate transactions that are prohibited under the Employee Retirement Income Security Act (ERISA). The Act defines a party-in-interest as any fiduciary, legal counsel, employee of an employer-sponsored benefit plan, or service provider to the plan. Accordingly, pension plan funds cannot be used to buy or sell property to or from a person who is a party-in-interest. For example, a pension plan could not purchase shares of stock in a company owned by a member of the company's investment committee. ERISA provides for specific monetary fines and penalties for violations of party-in-interest rules. Fiduciary liability insurance policies cover the defense costs incurred in conjunction with allegations of party-in-interest violations; although no coverage is available for damages, fines, and penalties associated with such claims.

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