Retirement Savings Practice Test 2025 - Free Retirement Savings Practice Questions and Study Guide

Self-dealing is a category of prohibited transactions defined by the Employee Retirement Income Security Act (ERISA), where a fiduciary, who has a duty to act in the best interest of plan participants, actually benefits personally from a transaction involving the retirement plan. This type of transaction is considered a conflict of interest because it can undermine the fiduciary's responsibility to manage the plan solely for the benefit of the participants and beneficiaries.

When a fiduciary engages in self-dealing, they are essentially placing their own interests above those of the plan participants. This is why such transactions are strictly prohibited; they can lead to mismanagement and the potential for harm to the retirement assets of individuals relying on the plan for their future financial security.

The other categories presented do not capture the essence of self-dealing as they either involve legitimate business transactions, dealings with external parties, or specific types of contributions that do not inherently conflict with the fiduciary's duty. Thus, recognizing self-dealing as a violation reinforces the importance of having fiduciaries act without personal gain when managing retirement plans.