Master Trust vs Commingled Trust

[TPATC]

I need help defining a Master Trust versus a commingled Trust. I have a few clients that invest their PS and MP Plan assets jointly. To date we have allocated the investment performance and underlying assets between the two plans on a consistent and reasonable basis for purposes of participant allocations and Form 5500 reporting. Recently an auditor (CPA, not IRS or DOL) asserted that these are Master Trusts that must file MTIA 5500s. In none of our situations are the Trust documents written as Master Trusts, but they do allow for the commingling of investments. While the investments may be placed with brokerage firms or mutual funds, the brokers or mutual fund families are not acting as Trustee or Custodian for the plans. The Plans are Trusteed by the shareholders. What insight can anyone out there offer?

[Guest CTYSON]

Do you have access to Janice Wegesin's book -- 5500 Preparer's Manual 2000 Plan Years? There's a chapter on Schedule D for Direct Filing Entities. It says that you can inadvertently create a Master Trust if you commingle assets of two plans of the same employer in any custodial account. So it doesn't appear you'd need to formally establish the Master Trust.

It also says that a regulated financial institution must be the trustee or custodian of the account. If they aren't then that may be your out?

I hope this helps!