Solo 401K: Exemption from prohibited transaction (PT) for Office Space & Other Necessary Services

Contracts or arrangements between a Solo 401k plan and a party in interest for office space or legal, accounting, and other services or combination of services are exempt from ERISA’s prohibition against transactions between plans and parties in interest if:

  1. The office space or services are necessary for the establishment or operation of the plan;
  2. The contract or arrangement under which the office space or services are furnished is reasonable; and
  3. No more than reasonbale compensation is paid for the office space or services.
  • See Section 408(b)(2) of ERISA for more information on this exemption.
  • Regulations issued by the Department clarify the terms “necessary service” (29 CFR 2550.408b-2(b)),”reasonable contract or arrangement” (29 CFR 2550.408b-2(c)) and “reasonable compensation” (29 CFR 2550.408b-2(d) and 2550.408c-2) as used in section 408(b)(2).

The rules pertaining to prohibited transactions applicable to qualified plans including Solo 401k plans are listed under Section 406 of ERISA.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>