5500 Schedule I - Q. 4i

[austin3515]

Question is: does the plan hold more than 20% of it's assets in a single security?

My question is, what if more than 20% is held in a single mutual fund? Or a separate account?

I know that this item applies only to pooled accounts, which mine happens to be.

I would have assumedthat the instructions would have clarified on this obvious question, but they do not seem to shed any light.

[JanetM]

Yes you would consider a single mutual fund or pooled account a single security. The plan must not be participant directed investments.

[Leopurrd]

Also, you don't report Gov't securities, regardless of their percentage

[austin3515]

TAGDAta just gave the opposite answer. They are not considered individual securities, according to TAG. Their rationale is that a mutual fund is inherently diversified, and what they are really looking for is, is the entire plan invested in one companies common stock or something...

Who rights these instructions, anyway?? How could they not explicitly address this???

[Leopurrd]

Who rights these instructions, anyway?? How could they not explicitly address this???

Yikes. I can understand why you are so confused!

I've always relied on the 5500 Preparer's Manual. Here's what it states for the line regarding MF's:

"Do include a mutual fund as a single security, even though such a security is generally diversified to minimize the risk of large losses."

This makes sense to me since you wouldn't want a pooled plan to invest only in one Mutual Fund, even thought it is technically "diversified". The question is really looking out for the little people who can't state where to invest their own $.

Good luck on your decision making!

[austin3515]

Where does one get a 5500 Preparer's Manual?

[Leopurrd]

I'm not sure...I think you can purchase a hard copy through Aspen publishers or someone like that?

We have ours online through cch.com.

[austin3515]

Well I pushed back on TagData, asking where the term security is defined, and this was his response:

ERISA Act Sec. 3. For purposes of this title:

(20) The term "security" has the same meaning as such term has under

section 2(1) of the Securities Act of 1933 (15 U.S.C. 77b(1)).

Austin again:

So, since mutual funds are the Act of 1934, they would not be considered a security.

[Leopurrd]

Austin again:

So, since mutual funds are the Act of 1934, they would not be considered a security.

Austin,

Thanks for passing that along! It just goes to show you that if you ask 5 different ERISA lawyers the same question, you'll probably end up with 5 different answers!

[JanetM]

Aspen publishing owned by CCH (who is owned by Wolters Kluwer). You can go to hr.cch.com or cch.com to find information.

Best thing you can do, IMHO, is to get a rep to come visit you and show you what they have online. They do have a vast resource you can tap into.

[JanetM]

Austin, maybe they should read 2(1) of 1933 act.

Section 2 -- Definitions; Promotion of Efficiency, Competition, and Capital Formation

--------------------------------------------------------------------------------

a. Definitions

When used in this title, unless the context otherwise requires--

1. The term "security" means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

[austin3515]

Sometimes I wonder if the DOL deliberates over stuff like this, comes to the conclusion that they have no idea, and so they just don't address it. I think I'm onto something here...

I suppose the conservative thing is to disclose mutual funds as though they were securities, so that will be my practice.

[JanetM]

I am sure they spend hours working on getting this stuff drafted. The definition of a security is 143 words, all in a single sentance.

[Archimage]

Austin, I agree with the practice of defining a mutual fund as a security. I have also found TAG not to always be right.