CD's and checking accounts not qualified plan assets?

[AlbanyConsultant]

Based on the following from Janice Wegesin's 5500 Preparer's Manual (Aspen) - which is a fine publication, and one I do not mean to disparage in any way! :

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The following are common issues raised with regard to fidelity bonding required for pension plans:

1. For purposes of indentifying nonqualifying plan assets held by small pension plans. Common examples are certificates of deposit or Israel Bonds. Typically, these certificates and bonds are physically held by the individual(s) named as plan trustee.

page 3-11

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there are some in my office who interpret this as saying any CD that is part of plan assets is a nonqualified asset. And by equivalence they extend this definition to checking accounts (because a previous version of the manual included them with CD's and IB's, notably absent in the current version). Granted Israel Bonds are usually a headache to start without further complicating them...

But has anyone else read this section and interpreted it this way? It seems a little too "broad stroke" to me. I could see reading it as "a CD or Israel Bond held in the name of the individual as trustee is a nonqualifying asset"; that just goes with what pension people have been saying for years: accounts must be set up in the name of the plan. What gets me is that nothing I see in the section quoted says yes, these are examples of nonqualified assets; it says these are "common issues raised"; what does that really mean?

So far, I got a reason of "that's they way we decided to interpret it a few years back, and we'll check when we've got some downtime", but I was hoping to have a solid case for the opposition by that time.

Thanks...

[Bird]

This is from RIA, but it's pretty much a quote from the regs ( Labor Reg. § 2520.104-46(b)(1)(ii)(A) )

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For purposes of the rules on obtaining a waiver of some of the annual reporting requirements for small plans, “qualifying plan assets” are defined as any of the following:

...

(3) any assets held by:

... a bank or similar financial institution, as defined in Labor Reg. § 2550.408b-4© ;

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I don't think a CD is typically held in one's hand like a bearer bond (I guess I'm disagreeing with Janice, which is a little scary), so I'd have to think it is generally an asset held by a bank and therefore a qualifying plan asset. I can't imagine how a checking acount wouldn't be a qualifying plan asset unless it wasn't in the name of the plan, in which case it's not a plan asset at all!?

Israel Bonds might/probably (?) be physically held; I know I have a couple of plans with them and think we generally report them as NOT qualifying plan assets. But, it might be possible that they could be held in an account so I don't know for sure that that's always the case. A similar example might be a dividend reinvestment plan - I've seen them where the initial shares purchased are physically held (and are not qualifying plan assets), but the reinvested shares are held by a transfer agent (e.g. Bank of NY) and IMO are qualifying plan assets. Sometimes the initial shares ARE held by the transfer agent and therefore would be qualifying plan assets. It depends on how the asset is held, not what the asset is.