Domestic/Foreign Trust

[Guest]

An article by Marjorie Martin in the Summer 1999 edition of the Journal of Pension Benefits ("New Attachment to 1998 Form 5500") references an attachment that must be submitted with a plan's 1998 Form 5500 in order for its qualified trust to remain a "domestic trust." This was supposedly a provision in the Small Business Job Protection Act of 1996. Included in the article is a sample attachment.

Is anyone actually using this attachment when completing the 5500's? Are there any exceptions to this filing? Any guidance would be appreciated.

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[Guest Dook]

I haven't read the article but...

The 1998 5500 instructions state "Notice 98-25 1998-18, I.R.B. 11, provides guidance relating to certain trusts concerning an election for continued treatment as a domestic U.S. trust even though the trust would be considered a foreign trust under the tests of section 7701(a)(30)(E). To accomplish this election, certain information may be required to be attached to the 1998 Form 5500, 5500-c/R or 5500-EZ."

There is no need for concern for the average 5500 filer.

[Wessex]

Deleted as a duplicate.

[This message has been edited by Wessex (edited 10-08-1999).]

[Wessex]

I am also looking at this issue as it applies to trusts of qualified plans. (I am an in-house counsel for a large bank that acts as trustee (usually non-discretionary) for many qualified plans.)

Notice 96-65 provided a transition period during which a trust could take action to come into compliance with revised 7701(a)(30)(E), which required that a trust will be a domestic trust if a US court can exercise primary supervision of trust administation and a US fiduciary has the authority to control all substantial decisions of the trust. The Taxpayer Relief Act of 1997 changed "fiduciary" to "person" and added a provision that permitted any trust that satisfied the old definition to elect to continue to be treated as a domestic trust even if it does not satisfy the new definition. Notice 98-25 provides guidance on the method and content of the statement required to make the election. The statement must be signed by the trustee, not by the plan sponsor or plan administrator.

I have concluded that it is not a "must" attachment as the article referred to above apparently stated. The statement would be required only if the trust did satisfy old 7701(a)(30)(E), does not satisfy current 7701(a)(30)(E), and wishes to continue to be treated as a domestic trust. It also seems to me that a trust that does not satisfy current 7701(a)(30)(E) would likely have previously made an election pursuant to Notice 96-65, otherwise, it would have been treated as a foreign trust for the last couple of years. Few trusts should be affected by this change.

Anyone else have any other thoughts?

[This message has been edited by Wessex (edited 10-08-1999).]

[Guest sacobb]

Funny this topic should come up. I was just asked by the outside counsel to one of my plans (reputable ERISA counsel from Washington DC) to make this attachment to the 1998 5500 filing that I was mailing today. The company for which we serve as trustee is located in the US but was acquired by a foreign parent company quite a few years ago. The plan and trust have been in existence since 1978 and the company was acquired by its foreign parent in 1990.