Brokerage Account and DB Plan

[Guest mingblue]

Are brokerage accounts legit for DB assets ? the first page of a recent monthly statement shows an individual as trustee and also has the name of the plan - is this sufficient info to know that the account is in compliance with any rules governing accounts that hold qualified plan assets ? are there any other issues that I should be wary of ??

[Guest Carol the Writer]

The only additional thing that you would need - and this really applies to all qualified plan investments - is a Trust Tax ID number from the Internal Revenue Service, identifying this brokerage account, or any other plan account, as being held by a tax-exempt trust fund. You can apply for this Number using IRS Form SS-4.

[SoCalActuary]

mingblue: what you are describing sounds like the normal course of business for the majority of small

plans. The trustee assumes investment management control, and has to use a brokerage account to

execute their investment decisions.

[Guest mingblue]

mingblue: what you are describing sounds like the normal course of business for the majority of small

plans. The trustee assumes investment management control, and has to use a brokerage account to

execute their investment decisions.

It's been awhile SoCal since my wild 'n woolly small plan TPA days - now it's insurance company and GA contracts with some outside assets in Trusts - just couldn't remember if brokerage accounts need more scrutiny .

[SoCalActuary]

mingblue - the issues of accountant opinion and bonding become much more important in the small

self-trusteed plans. If any assets of the plan are not held in the "favored" types of assets, then you need

an accountant's opinion, or you must have bonding to cover the value assigned to those assets.

But the practice remains common, nonetheless, because many plan sponsors are offended by the high

cost of a corporate trustee.

[Guest mingblue]

mingblue - the issues of accountant opinion and bonding become much more important in the small

self-trusteed plans. If any assets of the plan are not held in the "favored" types of assets, then you need

an accountant's opinion, or you must have bonding to cover the value assigned to those assets.

But the practice remains common, nonetheless, because many plan sponsors are offended by the high

cost of a corporate trustee.

At this point I'm just trying to educate myself so that I can ask the right questions - Carol's question was the type of thing I'm interested in - just want to make sure all investment buckets are in compliance so to speak - all I have at this point is the December 2006 brokerage statement - there's a money market account and employer stock - and I know that the stock can't be more than 10% of total plan assets -most of the assets are in our GA account and an outside trusteed account.

Periodically they put cash into the brokerage account, buy stock, and then transfer the stock from the brokerage account over to the outside trusteed account - don't know why they just don't put the money directly into the trusteed account ? maybe they have a favorite broker that likes commissions ? that's Ok with me as long as this brokerage account is legit.