This question has been passed through a few people so i only have a few facts. The sponsor of a DB plan has given plan money to a company that owns ATM machines. the ATM machines provide income to the owner based on the surcharges incurred by users of the ATM. Every month a check is written to the DB plan for its share of the surcharge fees.

The plan sponsor has received a notice from the IRS saying they need to file form 990 for the past 3 years to report the Unrelated Business Income Tax.

Is there a way to see this as something other than Unrelated Business Income?? Thanks.

What is meant by this?
Is the trust investing its assets? Is there a record of that investment?
What is the magnitude of the $ ?

My best guess would be it's a plan investment. I don't know the dollar amount. We're trying to find out the exact nature of the transaction.

I would think if the plan just loaned money to the company (note) with a standard fixed rate of interest loan that there probably is nothing wrong with that. However, if the transaction is structured different and they receive income based upon the performance of the ATMs that doesn't sound as good (UBIT vibes).

Oddly enough I had the same exact situation occur with a profit sharing plan we were administering. I wonder if the ATM machine company is targeting pension plans for some reason. If your client got a notice form the IRS regarding UBI, I wonder if the ATM pension asset thing is going on all over the place.

My boss ended up classifying the checks they received from the ATM company as royalties. Whether that is correct or not I can not say. I think he wanted to just ignore the issue.

BUT...........

The ATM machine investment made gobs and gobs of money the first year. I couldn't believe the amount of money he was making from them.

AND THEN..........

Boom! It all blew up on him and the ATM machines became worthless. I don't know the details on what went wrong but he had somehow put the majority of the plan's assets into the ATM machines and all of a sudden the plan had next to no money left. I think he reinvested the royalty checks he was receiving into more machines.

Needless to say this small plan that had about $150,000 in assets was reduced to about $40,000. Now we had concerns about fiduciary responsibility. He wanted to make a contribution to the plan to make up for the losses becuase he didnt want to have to explain to the employees that their balances were less than half (this was in the market up years of the 90s).

I can't remember what eventually was done. I think I may have switched jobs

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It reminds me of a scam that my grandfather ran into after he was retired. He bought a bunch of vending machines and the company helped him place them and he made some momney for awhile. Then they closed up shop. The vending machines at some point needed to be relocated because of stealing or slow sales. Because they was no vending company supporting him, he eventually had a garage full of vending machines.

I wonder if that's the same thing that happened with the ATM machines.