Qualifying plan assets -- treatment of Contribution Receivable

[Guest N'siah]

Does anyone know how contribution receiveables, that will be paid within the prescribed 8 and 1/2 month period, are treated under the new bonding requirements? Are they considered qualified plan assets or are they subject to bonding to avoid the new small plan audit requirement?

[Blinky the 3-eyed Fish]

See a prior discussion on this topic.

http://benefitslink.com/boards/index.php?showtopic=14153

[pjkoehler]

N'siah: See 29 CFR Sec. 2520.104-46(B)(iii)(A). It provides that the determination of the percentage of all assets consisting of "qualifying plan assets" for a given plan year is made in the same manner as the amount of the bond and x-refs 2580.412 dash 11, dash 14 and dash 15. They will eventually x-ref to dash 4 and ultimately dash 5, which equates "plan assets" for this purpose to the term "funds or other property." Contributions are not considered to be "funds or other property" (and hence are not taken into account in determining the percentage for purposes of the "qualifying plan assets" percentage test):

1. If the plan administrator is other than the employer plan sponsor, until they are actually received by the plan administrator;

2. If the employer is itself the plan administrator, until they are "taken out of the general assets of the employer and placed in a special bank account or investment account; or identified on a separate set of books or records; or paid over to a corporate trustee or used to purchase benefits from an insurance carrier; or otherwise segregated, paid our or used for plan purposes, whichever shall first occur."

Accordingly, the mere recording of a contribution receivable for financial statement purposes in accordance with the accrual or modified accrual method of accounting, is not enough to give rise to a "plan asset" for the limited purpose of determining the percentage of plan assets that constitute "qualifying plan assets."