Schedule of Assets Held - Column (a)

[Guest PHorn]

I've seen numerous banks and mutual fund companies through their trust banks, offering "full service" pension plans, particularly 401K's. They provide trust or custodial services and TPA services, and offer various mutual funds of money market funds which are sponsored and administered by related companies. Given a relationship of mutual fund and trustee, shouldn't an asterisk appear in column (a). Further, I would assume with so many such arrangements being offered that there is an exemption from prohibited transactions for such investments. I've seen First Union/Evergreen Fds, Fidelity/numerous Fidelity funds and Dreyfus/again numerous funds, and assume there would be more. I would appreciate any insight into this reporting issue.

[Guest twalters]

We do place an asterisk in column (a) of the Schedule of Assets Held as a party-in-interest transaction and add the following footnote to the financial statements:

Certain plan investments are shares of mutual funds managed by XYZ. XYZ if the custodian as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Fees paid to XYZ by the Plan for investment management services amounted to $ for the Plan year ended , 2000.

[Guest LisaPA]

I have wondered about this too. I think a party-in-interest would be a fiduciary with discretionary powers. Is the typical self-directed mutual fund arrangement considered discretionary?

[Guest twalters]

Hope this helps -

From Chapter 11 of the AICPA Guide to Audits of Employee Benefit Plans - Section 3(14) of ERISA defines a "party in interest" to include fiduciaries or employees of the plan, any person who provides services to the plan. While transactions with a trustee affiliate also serving as fund advisor would generally be prohibited transactions, the DOL has issued Prohibited Transaction Exemptions related to these types of transactions. Therefore, they are considered exempt party in interest transactions and would not have to be reported (as a prohibited transaction) on the Form 5500 or in the supplemental schedules. HOWEVER, in accordance with FASB 57, related party transactions should be disclosed if they are material to the financial statements.

Basically - still a party in interest transaction and disclosed - but not a prohibited transaction.

[Guest tompga]

You should be including the asterisk in Col. A of the schedule of assets held for investment. The custodian in your example is a party-in-interest and the asterisk is required. There is no exception for exempt party-in-interest transactions when dealing with this schedule.

[Guest twalters]

The exemption issued by the DOL provides that these types of transactions will not be reportable as PROHIBITED party in interest transactions - but they are still party in interest transactions and are reported as such by including the asterisk in column A and footnote to financial statements. The footnote may be omitted if they are not material to the financial statements (as would be true with any footnote in the financial statements). Sorry if I was not clear in my prior statement regarding the exempted (meaning - not prohibited) status of these types of party-in-interest transactions.