Section 4975 of the Internal Revenue Code (IRC) imposes a hefty penalty on transactions it deems “prohibited transactions.” A penalty might include excise taxes, income taxes and/or loss of the qualified status of your 401(k) Plan. Therefore, this relates to you and your Guidant 401(k), and you need to be aware of what a prohibited transaction is and how to make sure you are not engaged in such activity.
IRC § 4975(c)(1) states that a “prohibited transaction” includes any “direct or indirect”:
(A) sale or exchange, or leasing, of any property between a plan and a disqualified person;
(B) lending of money or other extension of credit between a plan and a disqualified person;
(C) furnishing of goods, services, or facilities between a plan and a disqualified person;
(D) transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan;
(E) act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account; or
(F) receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan.
If you would like further information about Prohibited Transactions, or you are concerned you have engaged in a Prohibited Transaction, you should consult with your tax or legal advisor.