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Strictly LiableDavid Randall Jenkins, Ph.D.

Retirement Industry Trust Association

Las Vegas

October 2015

© 2015David Randall Jenkins, all rights reserved.

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Strictly Liable

The Strict Liability Statement

The Self-Directed IRA Administrator is strictly liable for self-directed IRA damages and losses caused by the Administrator’s failure to assure Section 4975 impounded management and investment risk diversification policy compliance on any of the following grounds or reasons—

Algorithm LLC – David Randall Jenkins, Ph.D.

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Strictly Liable

Allowing Disqualified Person Directed Investment Strict Liability

1. The Administrator allowed an account holder to direct investment in fifty percent or more of an investee entity’s capital equity interests.

Management Risk Diversification Strict LiabilityAlgorithm LLC – David Randall Jenkins, Ph.D.

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Strictly Liable

Allowing Insufficient Non-Zero Voting Combination

Directed Investment Strict Liability

2. The Administrator allowed the account holder to direct investment in less than fifty percent of an investee entity’s capital equity interests at a time when non-zero voting combinations numbered less than three.

Management Risk Diversification Strict LiabilityAlgorithm LLC – David Randall Jenkins, Ph.D.

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Strictly Liable

Allowing Third Party Discretionary Authority or Control Directed Investment

Strict Liability

3. The Administrator allowed the account holder to direct investment in less than fifty percent of an investee entity’s capital equity interests at a time when majority decision-making failed to manifest at least any two out of three voting combinations, or greater diversification.

Management Risk Diversification Strict LiabilityAlgorithm LLC – David Randall Jenkins, Ph.D.

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Strictly Liable

Allowing Generally Proscribed Directed Investment Strict Liability

4. The Administrator allowed an account holder’s management risk diversification policy compliant directed investment when plan assets were invested outside the presumptive plan asset complement range and disqualified persons accrued non-specifically proscribed benefits.

Algorithm LLC – David Randall Jenkins, Ph.D. Investment Risk Diversification Strict Liability

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Strictly Liable

Allowing Specifically Proscribed Directed Investment Strict Liability

5. The Administrator allowed an account holder’s management risk diversification policy compliant directed investment when a plan asset rule exception had not been properly invoked and disqualified persons accrued specifically proscribed benefits.

Algorithm LLC – David Randall Jenkins, Ph.D. Investment Risk Diversification Strict Liability

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Strictly Liable

Self-Directed Administrator Section 4975(a) and (b) Prohibited Transaction

Excise Tax Strict Liability

Whenever the Self-Directed Administrator fails to assure Section 4975 impounded management and investment risk diversification policy compliance it is strictly liable for the Section 4975(a) and (b) prohibited transaction excise taxes and the IRA shall not be terminated pursuant to Section 408(e)(2)(A).

Algorithm LLC – David Randall Jenkins, Ph.D. Prohibited Transaction Excise Tax Liability

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Strictly Liable

Self-Directed IRA Account Holder ERISA Section 502(a)(2) Causes of Action

Since—

1. Section 4975 impounds and contextually qualifies Sections 1104, 1109, 1110, and 1132, Title 29 U.S.C., for failure to assure Section 4975 impounded management and risk diversification policy compliance, andAlgorithm LLC – David Randall Jenkins,

Ph.D. ERISA Section 502(a)(2) Causes of Action

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Strictly Liable

Self-Directed IRA Account Holder ERISA Section 502(a)(2) Causes of Action

2. Congress incorporated Section 4975 into Section 408 without limiting such contextual qualification, then

3. Self-directed IRA account holders may bring ERISA Section 502(a)(2) causes of action against self-directed IRA administrators.

Algorithm LLC – David Randall Jenkins, Ph.D. ERISA Section 502(a)(2) Causes of Action

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Strictly Liable

Self-Directed IRA Administrator Criminal Liability

Self-directed IRA administrators may face federal mail or wire fraud and racketeering criminal liability whenever the administrator undertakes a pattern of materially omitting Section 4975 impounded risk diversification policy requirements in furtherance of a scheme to wrongfully take custodial fees from account holders.

Algorithm LLC – David Randall Jenkins, Ph.D. Administrator Criminal Liability Exposure

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Strictly Liable

Algorithm LLC – David Randall Jenkins, Ph.D. Administrator Criminal Liability Exposure

The Five Deadly Sins and the Three Punishments

1 Allowing Disqualified Person Directed Investment

2 Allowing Insufficient Non-Zero Voting Combination Directed Investment

3 Allowing Third Party Discretionary Authority or Control Directed Investment

4 Allowing Generally Proscribed Directed Investment

5 Allowing Specifically Proscribed Directed Investment

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Section 4975(a) and (b) Prohibited

Transaction Excise Tax Liability

Section 502(a)(2) Account Holder Cause of Action

Liability

Federal Mail or Wire Fraud and Racketeering Criminal

Liability

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Strictly Liable

Transitioning from Section 4975 Impounded Risk Diversification Policy

Noncompliance to Compliance

1. Continuing the Research Effort,

2. Administrator and Account Holder Education,

3. Continuing the Conversation into RITA’s Spring 2016 Conference, and

4. Planning IRS and DOL Involvement.Algorithm LLC – David Randall Jenkins, Ph.D. The (Noncompliance: Compliance) Transition