Schedule I question 4k Bonding

[PFranckowiak]

Question realates to Small Plan Audit and Bonding. I have a plan that has employer stock as an OPTION. We are filing a 5500 and Schedule I. I am wondering abou the required bonding. The employe stock is over 5% of the plan assets. Employer stock is not traded. (small company) I don't understand the Qualifying Employer Securities below. I looked up the sight and I still am confused. Do they need a bond covering the entire amount of the Employer Stock to get out of the Small Plan Audit Requirements?

Thanks

Pat

I"n the case of an individual account plan, any assets in the individual account of a participant or beneficiary over which the participant or beneficiary has the opportunity to exercise control and with respect to which the participant or beneficiary is furnished, at least annually, a statement from a regulated financial institution referred to above describing the assets held or issued by the institution and the amount of such assets;

Qualifying employer securities, as defined in ERISA section 407(d)(5); "

[Archimage]

What do you mean by "option"? Do you mean this is an investment choice or do you mean stock options are listed as an asset of the plan?

[PFranckowiak]

ER stock is an option as well as some Mutual Funds. EE's also have the option of setting up a self directed brokerage account.

Thanks

Pat

[Archimage]

It is a qualified employer security if it meets the definition in ERISA 407(e)(1). It basically says that no more than 25% of the outstanding stock may be held by the plan and 50% of the outstanding stock must be held by persons independent of the company. It is my understanding that if a plan is an individual account plan then it is exempt from this requirement. If my memory is incorrect then hopefully someone will correct me.

[austin3515]

But with respect to the small plan audit waiver, employer securities are not subject to the additional bonding requirements.