Is Schedule of Assets Held for Investments at End of Year Required?

[Guest slipps]

Form 5500, Schedule H, Part IV, Question 4i, asks if a plan holds assets for investment? The instructions give a format to use and a whole list of assets that are excluded for this purpose. Mutual funds are one of the assets that appears to be excluded. So, if a daily 401(k) plan is only investing in mutual funds, do you answer question 4i "No" and thus are not required to complete or attach a "Schedule of Assets Held for Investment Purposes at End of Year?

[Disco Stu]

I read the instructions a little differently. Any asset which is held by the plan on the last day of the plan year is an asset held for investment.

The list of exclusions pertains to assets bought and sold during the plan year. Mutual funds are included on this list. So if Fund A was only owned by the plan for a two week period in August, you would not include that on the schedule.

My experince as a TPA is that these assets schedules have been produced by the plan's auditors as part of their financial statements. I'd be curious if other TPAs out there have similar experiences.

[JohnCheek]

Disco Stu is right.

The Schedule of assets held for investment actually requires two lists: a) all investment assets held at year end, and b) assets bought and sold during the plan year. The second schedule (bought and sold) has numerous exceptions, including most SEC-registered securities, bank CDs, government securities, etc. Also, any assets that are required to be reported on one of the other required schedules, such as the 5% transactions, or the prohibited transactions schedules, do not have to be reported on the bought and sold schedule. Most investments of most plans should be exempt from reporting on the second category. However, it is important to note that none of these exceptions apply to the first part, the assets actually held at year end.

Most of the time, I would expect the auditors to provide these schedules, because their audit report is required to address these schedules.