Читать книгу Auditing Employee Benefit Plans - Josie Hammond - Страница 41

It is becoming more and more common that plans acquire their investments indirectly, rather than having direct ownership of securities or other assets. The most common form of ownership is through a mutual fund. Mutual funds do not trigger any separate reporting. Other indirect forms of ownership do require additional reporting that affects the audit and the financial report.

These are generally referred to as “Direct Filing Entities,” though that is somewhat of a misnomer, as not all such entities are required to file separately.

The types of direct filing entities (DFEs) are as follows:

 Master Trust Investment Account (MTIA)– A master trust is a trust for which a “regulated financial institution” serves as trustee or custodian (regardless of whether such institution exercises discretionary authority or control with respect to the management of assets held in the trust), and in which assets of more than one plan sponsored by a single employer or by a group of employers under “common control” are held.Common control is determined on the basis of all relevant facts and circumstances (whether or not such employers are incorporated).A regulated financial institution means a bank, trust company, or similar financial institution that is regulated, supervised, and subject to periodic examination by a state or Federal agency. A securities brokerage firm is not a similar financial institution.A master trust investment account may consist of a pool of assets or a single asset. Each pool of assets held in a master trust must be treated as a separate MTIA if each plan that has an interest in the pool has the same fractional interest in each asset in the pool as its fractional interest in the pool, and if each such plan may not dispose of its interest in any asset in the pool without disposing of its interest in the pool. A master trust may also contain assets that are not held in such a pool. Each such asset must be treated as a separate MTIA.

 Common Collective Trust (CCT)– A common collective trust is a trust maintained by a bank, trust company, or similar institution which is regulated, supervised, and subject to periodic examination by a state or Federal agency for the collective investment and reinvestment of assets contributed thereto from employee benefit plans maintained by more than one employer or a controlled group of corporations.

 Pooled Separate Account (PSA)– A pooled separate account is substantially similar to a CCT, except that a regulated insurance company holds the funds.

 Group Insurance Arrangement (GIA)– A group insurance arrangement provides benefits to the employees of two or more unaffiliated employers (not in connection with a multiemployer plan or a collectively-bargained multiemployer plan), fully insures one or more welfare plans of each participating employer, uses a trust or other entity as the holder of the insurance contracts, and uses a trust as the conduit for payment of premiums to the insurance company.

 103-12 Entity– The most obscure of the DFEs is the 103-12 entity. It is defined in the ERISA regulation for which it is named. A 103-12 entity is frequently a trust or partnership, which is not one of the preceding entities. It holds assets of more than one plan. Separate filing is elective, but such filing allows the plan to report its investment interest in the entity. Absent this separate reporting, the plan must report the plan’s share of each of the entity’s underlying assets and, if material, the auditor would consider procedures to audit this underlying activity.