Custodial Accounts

[Archimage]

I realize that a 403(B)7 is setup through a custodial account arrangement and there is no Trust vehicle involved. But is there anyway to have a Trustee involved with this type of plan?

[mbozek]

who would be the trustee? A bank??? an individual? Would they be fids under ERISA? Who will pay the trustee for the duties it assumes? The only type of trust that might work is a grantor trust which is owned by the employer with an independent trustee. But why does the sponsor want to add this complexity? Will the trustee control the investments in the participant's accounts?

[Archimage]

It is an ERISA plan and the client would pay all trustee costs. A bank would be trustee. The reason this came up is because a salesperson sold it this way and now we have to clean the mess from his ignorance.

I think salespeople are just one level above lawyers! (Just kidding)

[mbozek]

Why not unwind the trust and transfer the funds to a custodian. The trust should be terminable by the plan sponsor.

[Archimage]

In my research I have found out that a trust arrangement can be used in lieu of a custodial agreement for 403(B) plans.

Treas Reg. 1.401(f)-1

[Guest pjb]

Could one establish a trust under which the 403(B) non-church plan would permit participants to invest in annuity contracts and/or custodial accounts?

[mbozek]

Given the prior post I guess you could but it would be rather cumbersome and expensive to pay for a trust that is not legally required. I hope that the costs will not be passed on to the participants.