Master Trust

[alexa]

We have 2 DB plans in 1 trust

However, assets are not commingled; there are subaccounts setup for each plan. The plans have not merged.

Our attorney is saying we have a "master trust" . Our auditor is saying "no" since the assets are not commingled; each plan has separate accounting and it is not a % of commingled assets

Help!

Does one have a master trust if 2 DB plans are in 1 trust ? And if yes, does a separate Form 5500 have to be filed fo rmaster trust

What are the advantages of having a master trust?

Thanks

Lexy

[JanetM]

You have a MT and the trustee is going to certify the assets for the total trust. The auditor tells you no? What are they relying on in order to avoid full scope audit? Or are they telling you this isn't MT and the have to do full scope audit ( at much fees)?

One advantage of MT is reduced fees. I have 13 DB in MT and 4 DC in MT. Only pay one time for Trustee fees and due to asset base the custodian fees are pushed down. Couple of investment advisors and dozen inv managers keeps things simple. Biggest advantage is plan 5500. Single assets is inv in MT and you don't have to worry about all the detail by plan. Trustee provides all detail at MT level for the MT 5500 filing.

[alexa]

The problem is the trustee never sent us a master trust Form 5500 asset detail that was certified

The sent a 1-page statement certifying the annual Form 5500 statements but prepared them as if they were separate Form 5500's so very confusing

They sent us just the separate plans accounts showing a combined account for each plan but no combined combined

Hope this makes sense

Only think I can think of is that since the plans were separately accounted for we need to add the combined accounts together to get the Sch H info for the maseter trust filing

BTW auditor is in agreement if there are 2 plans in 1 trust we have a master trust

what was confusing did we indeed have that scenario based on the audit reports the trustee sent

You have a MT and the trustee is going to certify the assets for the total trust. The auditor tells you no? What are they relying on in order to avoid full scope audit? Or are they telling you this isn't MT and the have to do full scope audit ( at much fees)?

One advantage of MT is reduced fees. I have 13 DB in MT and 4 DC in MT. Only pay one time for Trustee fees and due to asset base the custodian fees are pushed down. Couple of investment advisors and dozen inv managers keeps things simple. Biggest advantage is plan 5500. Single assets is inv in MT and you don't have to worry about all the detail by plan. Trustee provides all detail at MT level for the MT 5500 filing.

[J Simmons]

Often the same entity will serve as trustee with regards to assets of more than one QRP. This does not necessarily mean that all the assets belong to a single, master trust simply because they use the same trustee.

Where the assets are not pooled and each QRP has a percentage, but are separately accounted, what differentiates a situation of two separate trusts from a single, master trust situation?

Factors I would look for include whether there are different trust instruments (governing documents that outline the terms by which the trustee holds the assets) for the two plans, or just one trust instrument for the two QRPs?

Are all the assets--despite being separately accounted for--obligated to meet each benefits obligation under both QRPs?

Are the the assets titled differently along the lines of the separate accountings for the two QRPs?

You may not have a master trust, but simply the same trustee with respect to two trusts.

[JanetM]

John I don't agree. Years ago, when were still the buns to guns group, we moved all the plans to single trustee and put under single trust document. Each QP had its own investments. Because all the plans were covered by one trust agreement the legal opinion was that this was MT. It didn't matter that none of the plans shared assets, it was the fact that there was single trust agreement that covered two plans.

[J Simmons]

JanetM,

Do you recall what the authoritative source that legal opinion used for definition of 'master trust'? Most every description I've heard requires some collective or pooling of assets, and each plan having a percentage thereof. Seems rather form over substance to say that two or more funds separately accounted for are part of a master trust. One document certainly is a factor towards a master trust (hard to imagine how a master trust would exist without a shared document). But whether the same document governing two separately invested funds of itself renders the separate funds to be part of one master trust seems rather formalistic.

[JanetM]

John,

Legal said it was MT. Because the MT agreement provides that trust company managed pension assets for more than one plan sponsored by related companies in a single trust account. The interpretation was that "single" trust account, even though it didn't pool plan accounts, made it MT.

The arrangement was in place form 1995 to 2005 and was never questioned by auditors, IRS or DOL. 5 of the plans were audited and nothing was said about the MT or the fact that plans didn't pool the assets.