Interpretation of Section 406(a)(1)(C) - Furnishing of Goods, Services or Facilities Between a Plan and a Party in Interest
The Conference Report mentions, as an example of a section 406(a)(1)(C) transaction, the furnishing by a plan of personal living quarters to a party in interest. In the absence of exemptive relief (discussed in Assignment 18), section 406(a)(1)(C) would also prohibit parties in interest from furnishing trust, brokerage or recordkeeping services to a plan. As a practical matter, the Department generally treats violations of section 406(a)(1)(C) as violations of section 406(a)(1)(D), which is more encompassing. Section 406(a)(1)(D) prohibits, among other things, the use of plan assets for the benefit of a party in interest.
It is interesting to note that because anyone who provides services to a plan is a party in interest, any subsequent arrangement by that party to provide an additional service to the plan will be a prohibited transaction. As you will learn in Assignment 21, a statutory exemption under section 408(b)(2) provides exemptive relief for that situation, provided certain conditions are satisfied.