Master Trusts

[Guest ablach]

How are participant loans handled in a 401(k) Plan Master Trust? Specifically, are they:

(a) pooled together and considered one MTIA with the individual plan's interest in such MTIA being the aggregate of that plan's participant loans, or

(B) can they be pooled in with other participant-directed assets as one MTIA, as allowed under the special exception for participant-directed assets in a 401(k) Plan?

[JanetM]

Participant loans are shown on 1c8. They are considered a single asset. Aggregate all loans from all plans in the master trust.

All interest paid on all loans goes on 2B1E.

[Guest ablach]

Thanks Janet for your reply. What I believe you are saying is that you would include participant loans in the same MTIA with all other participant-directed assets and not as a separate MTIA. Is this correct? As you know, Master Trusts can have more than one MTIA depending on the "pool of assets" rule. The DOL instructions are unclear as to how participant loans are characterized. I wanted to know how other preparers were handling participant loans since the instructions are vague.

[JanetM]

Not sure what you mean by - for example. I have 5 DC plans in MT. The plans have the same investment elections -

4 institutional class mutual funds

2 common collective fund

1 company stock

1 loans

I don't invest in other master trust arrangements - MT shows assets on lines 1c4B - for company stock, all mutual funds on 1c13 for reg. inv., 1c9 would be common collective and loans

on 1c8.

On the returns for each plan. You show one line of investment - all assets including the loans - on 1c11 as value of MTIA.

Am not sure what you mean by "Master Trusts can have more than one MTIA depending on the "pool of assets" rule". This would be if a Plan (singular) would invest assets in multiple MT arrangements. For this to happen you would have to have a Plan that has part of its assets in one MT and part in another. Are you confusing the MTIA with common collective funds or other types of assets?

[Guest ablach]

In paragraph 4 of the DOL Form 5500 instructions, the first sentence states "The assets of a master trust are considered for reporting purposes to be held in one or more "investment accounts."" It then goes on the explain how this can occur (pools of assets). A 401(k) Plan usually has only one MTIA because most 401(k) plans are completely participant-directed and have the type of assets as outlined in Note(2) of the DOL instructions concerning MTIAs. However, for instance, I have a client with a MT which is comprised of two 401(k) Plans and an ESOP. The employer stock in the ESOP is a separate MTIA that I have to file a separate DFE Form 5500 because it is not subject to participant direction. The concern I have with participant loans is because, even though they are participant-directed, they do not really fit into any of the categories specified in Note(2). I agree with your assessment though that they belong in the "participant-directed MTIA" since I don't think a separate MTIA just for participant loan makes any sense (of course when does the IRS of DOL make sense, ha ha).

[JanetM]

I think you are reading too much into this. You said "The employer stock in the ESOP is a separate MTIA that I have to file a separate DFE Form 5500 because it is not subject to participant direction."

The employer stock - just because it is not participant directed does not make for a complete new DFE filing. The master trust filing will include all assets.

Now if you are using a MT for mutual funds and other investments and the ER stock is not held in side this MT - you may have a separate filing due.

I think you are just making this too complicated.

[Guest ablach]

Everyone interprets things differently. Thanks again for your imput.

[Guest Emiliano]

Is a participant loan a loan from the plan or from the Master Trust? If it is a loan from the plan to a participant, then should it not be reported on line 1©(8) of the plan's Sch. H? If the Master Trust makes a loan to someone who just happens to be a participant in the plan, then it would be considered an asset of the Master Trust.

[Guest ablach]

Yes, that is another option, indicating the participant loans for each plan on their individual Schedules H. However, if the Master Trust holds the notes as an asset in the Master Trust, can you separate the participant loans out? I'm not sure. I am actually waiting for a call back from from one of the chief accountants at the DOL in regards to MTIAs. Hopefully, I can get some answers. I will post them here to finish the thread.

[Guest ablach]

FYI...from my discussion with an official at the DOL's Office of the Chief Counsel:

1. Participant loans are an asset of the plan, not the Master Trust, and should be indicated on the appropriate lines of the plan's Schedule H.

2. Assets held in a Master Trust which are NOT participant-directed (i.e. match which is automatically invested in employer stock) are considered a separate MTIA from those that ARE participant-directed. Hence, one MTIA DFE filing required for participant-directed assets and one MTIA DFE filing required for the ER stock.

3. For Master Trusts whose underlying plans are non-participant directed, such as DB Plans, the "pool of assets" rule explained in the Form 5500 instructions apply. Therefore, if the assets in the Master Trust were comprised of several managed funds, each managed fund would be considered a MTIA with a DFE filing required for each.