Schedule D, PSA

[Guest jim williams]

Would mutual funds be considered Pooled Separate Accounts that are required to be reported on Schedule D? Or is a Pooled Separate Account an invested solely offered by the insurance company?

[JohnCheek]

Nope, a mutual fund is not a pooled separate account.

A PSA is an investment with an insuarance company, solely for assets of employee benefit plans, which plans are sponsored by more than one employer. (Count controlled groups of corps as one employer).

[Guest jim williams]

Thanks, that's what I thought. But for some reason I received Schedule D information from Equitable for a Plan whose assets consists solely of mutual funds.

[R. Butler]

Are you positive that the Plan is investing directcly in the mutual fund? It is my understanding insurance companies often purchase the mutual funds indirectly through an account that invests solely in the mutual fund desired. The account used as the purchasing agent contains the assets of several plans. This would make the arrangement a PSA.

[Guest jim williams]

That may be the case. I wasn't aware of such an arrangement. I have been unsuccessful in receiving an explanation from Equitable on exactly why a Schedule D is being issued only that it is automatically generated when the Schedule A is generated. But I'll file the Schedule anyway to be on the save side. Thanks.

[Guest kowen]

R. Butler:

Just out of curiosity, what is the advantage to the insurance company or the plan of such an arrangement? I assume it has to do with costs.

[R. Butler]

I don't know if there are any advantages. Our firm happens to handle several plans with various insurance companies and just from working with those plans I know that this often how they do business.

[R. Butler]

Out of my own curiosity I just asked an agent I that I know why the PSA's. She gave me two reasons:

1. Cost. By putting a large bulk of money with a Mutual Fund they can negogiate lower expense ratios.

2. A more streamlined process. Evidently the insurance company can replace the money manager without necessarily replacing the fund. (I'm not really sure what this means.)

[Kristina]

A pooled separate account is often an account that is invested in a mutual fund. It doesn't have to be, but it often is.

An insurance company contract can invest in numerous mutual fund families without the withdrawal issues when participants move their money to another mutual fund. There is no surrender charge to the participant and there is no time lag waiting for the settlement for the participant. The advantage is going directly from Fidelity to Janus, for example, without having to get a check or an electronic transfer.

There are additional charges made by the insurance company so that the unit price of a mutual fund held under the insurance contract will not be the same as the published unit price for the same mutual fund held outside an insurance contract.