Schedule of Assets Held for Investment

[Guest Jeff Underwood]

I recently received a statement from the auditor indicating that all of a plan's assets should be marked as "party-in-interest" because they are held with an insurance company. The plan assets are held with ING. Some of the assets are in proprietary funds and we have always marked those as "party-in-interest". Some of the funds do not appear to be ING-managed (ING does not appear in the fund name as it does on the others), so we have never marked them as "party-in-interest". I pointed this out to the auditor, along with the observation that they have apparently followed the same thinking in their prior audit reports. His response was that the schedules in the prior year audit reports were not correct and reiterated his assertion that all assets held at an insurance company were "party-in-interest". Any thoughts?

[Guest JimD]

Jeff: Why would there be any party-in-interest transaction? Are you the insurance company? There is no party-in-interest transaction just because insurance funds are used.

[E as in ERISA]

He has to give you a reason.

[bzorc]

FWIW, in doing our certified audits, we look to the Schedule P. If ING were the trustee, we consider them a "party-in-interest" and asterik all of column (a), as well as inserting a footnote that describes the party-in-interest" relationship (ING is the trustee, makes investment transactions, therefore they are a party-in-interest). If an owner of the company is the trustee, we consider ING to be the custodian of plan assets, and not a party-in-interest.

[Guest 5500]

First, your auditor should do a better job of explaining his position to you.

As to the reply making a distinction between ING being the trustee v. the custodian, I believe that the custodian, like all service providers, is still considered a party-in-interest.

For purposes of the schedule in question, remember they are asking about the investment itself, not the party (broker etc.) the investment was purchased through. That comes into play on another schedule. We mark the asterisk if the investment is somehow related to a party-in-interest. I think this is the way Jeff in the original post was looking at it. If the plan holds shares in a mutual fund that is related to the plan's custodian, we mark that investment with the asterisk. If the plan holds a mutual fund that is not related to any party-in-interest, it is not marked, even though it is purchased through the same custodian. That's the way I look at it - is the investment itself with a party-in-interest?

I agree with Jeff's treatment and do not know what would cause the auditor to make that statement about investments held at an insurance company, assuming that the investments are not funds related to the insurance company.

There could be confusion about the wording in 2520.103-6 where an insurance company would be considered a "person" when a broker/dealer would not, but that reg is not applicable to the schedule in question as it deals with transactions, not the actual investment itself.