Any such thing as "plain English" definitions of the various

[John A]

Does anyone have a good, fairly brief, reasonably understandable definition of the types of Direct Filing Entities:

Master Trust Investment Accounts (MTIAs)

Common or Collective Trusts (CCTs) of banks,

Pooled Separate Accounts (PSAs) of insurance companies,

103-12 Investment Entities (103-12 IEs), and/or

Group Insurance Arrangements (GIAs)?

Definitions in Form 5500 instructions seem a bit complex - any way to tranlate them into "plain English" for plan sponsors looking to understand them?

[Kristina]

John,

A direct filing entity is a bank, trust company, Financial Institution or insurance company that files as a DFE. This means that they file a 5500 series as the Direct Filing Entity listing all of the plans which invested in their MTIA, CCT, PSA or 103-12 on Page 3 of the Schedule D. If the bank, trust company financial institution or insurance company your plan deals with does not file as a DFE, it means you will have to do additional work on the Schedule H in that you will have to list the underlying assets of the PSA or CCT on the Sch H instead of showing the total on the Pooled Separate Accounts or Common Collective Trust lines. Therefore the special requirements only impact large plans.

A MTIA is required to file as a DFE. A Master Trust Investment Account has funds of more than one plan sponsored by the same employer. For example, XYZ Corporation 401k Profit Sharing Plan and XYZ Corporation Defined Benefit Pension Plan are invested in the same Master Trust. You will also report the MTIA on the Schedule D.

A CCT Or Common Collective Trust holds the assets of many plans under one trust. The Bank or financial institution would be able to tell you if they are a CCT and if they intend to file as a DFE. If they do not file as a DFE, it is no big deal for you as the plan normally receives a report showing that plan's portion of each investment held in the CCt. CCTs are not required to file as DFE's. Whether the CCT files as a DFE or not, you must complete a Schedule D for each plan that invests in the CCT.

A PSA or Pooled Separate Account is issued by an Insurance Company. They too are not required to file as a DFE. If they do not file as a DFE, they will have to provide you with the underlying assets to report on the Sch H. (Good Luck). The insurance company will have to tell you which accounts are true PSA's. It is common for PSA's to be held in a group annuity which also holds assets that are comingled with the assets of the insurance company. Whether the Insurance Company files as a DFE or not, you must complete a Schedule D listing each PSA.

A 103-12 Investment entity was the hardest for me to peg. The IRS and the DOL could not give me examples of such an entity except to say that if you have one, you know you have one and you have been subject to special filing requirements since ERISA. An investment entity holds the assets of two or more unrelated plans. (My thought was Plan A and Plan B own Hotel C in which 103-12 IA invests. I know there are people who have these and I would love a better explanation.) A 103-12 is not required to file as a DFE. Whether the 103-12 files as a DFE or not, you must complete a Schedule D showing each 103-12.

The financial institution or insurance company is the only source to determine if you are dealing with a DFE or not. And if you have small plans, it does not change your filing requirements if they are or they are not DFEs.

I hope this helps.