Schedule A Requirements for Insurance Company - Combined Trust

[Medusa]

I have a client with a plan that has a 401(k) profit sharing component and a money purchase component. Although the two components share a plan document, they got separate determination letters and the intent was to file separate 5500's. The money purchase component was just added in 2000.

The document provides for only a single (combined) trust. The trust assets are invested in a single group annuity contract (bundled product with separate subaccounts for each money type).

Is the insurance company obligated to provide separate Schedule A's and financial schedules for each plan, or since there is only one group annuity contract, are they required to prepare only a single Schedule A and set of financial schedules? The insurance company feels that their obligation goes to the contract level, whereas the sponsor and recordkeeper do not want to have to split the information out themselves. This can be nasty, as in the case of reportable transactions.

A cite would help. I am attempting to head off a "developing situation". As a last resort, we will try to do something with reporting as a MTIA, but the sponsor really does not want to have to be responsible for 3 5500's.

[Guest F1fan]

I think the "developing situation" may have already developed. It appears that your client has two separate plans which happen to use a master trust to hold the corresponding assets. Under Treasury Regulation 1.401(k)-1(a)(1), a money purchase pension plan (MPPP) cannot include a 401(k) feature. (Because you note the MPPP was new in 2000, we'll assume that it is not a pre-ERISA MPPP that is excluded in the same regulation.) That is presumably why the client has received separate determination letters for the 401(k)plan and the MPPP. You note that they use the same document, but I can't help but wonder if that is a reference to the trust document. Your query also notes that they use a single trust to hold the combined assets, so either by design or mere application they seem to have created a master trust. Therefore, it appears a master trust filing would be required because the client has a MTIA. As you noted,, this would be in addition to the two 5500s for the 401(k) and MPPP.

As for the Schedule A, the instructions and the form itself consistently refer to an insurance "contract" or "policy." I'm not aware of any ERISA regulations that specifically address a carrier reporting by plan versus by contract. Based on my experience with insurance carriers, I would venture a guess that the odds of your client getting the carrier to change its position range from slim to nil. However, even if the carrier does acquiesce and issue separate Schedules A for the 401(k) and MPPP, your client would still appear to have a master trust and a corresponding filing requirement. If the client argues that there is not a master trust, then one must deal with the issue as to why the assets of two plans have been commingled. Perhaps the real issue is larger than a 5500 reporting matter?

[Medusa]

Thank you, Tom. I was kind of headed there myself and had recommended that to the broker/TPA. The two components ARE actually combined in one plan document. The attorney-author's volume submitter plan is structured that way (not my favorite, but what can you do). However, the intention all along was that they share a trust. The broker is beating up the insurance company telling them that they are failing to comply with ERISA - but I don't think they really are.