Plan Assets
When a plan makes an investment, the assets of the plan include the investment. Examples of assets owned by a plan* that are plan assets include:
Cash
Savings accounts
Certificates of deposit
U.S. and corporate debt
*Evidence of the plan's ownership inter
Other examples of plan assets include
Shares of publicly-offered stock
Shares in mutual funds
Real estate, directly owned
Loans
Look-Through Assets (Always)
For certain investments, plan assets include not only the ownership interest in the investment, but also include the underlying assets owned by the investment. Plan assets ALWAYS include the ownership interest and the assets owned by the entities listed o
Example
Bank Z manages the assets of a collective trust in which Plan A invests. The collective trust makes a loan to the President of plan A's sponsor.
The underlying assets of a collective trust are plan assets. Those assets include a loan from the plan to the
Look-Through Assets (Never)
Plan assets include the ownership interest but NEVER include the underlying assets owned by the following investments:
An investment that is not an "equity interest"
An " equity interest" that qualifies as a "publicly-offered security"
An investment in a
Example1
Plan A owns investments in mutual funds. The shares of the mutual funds are plan assets but the assets owned by the mutual funds are not plan assets.
Unlike most pooled investments like pooled separated accounts or collective trusts, there is a special ex
Look-Through Assets
Besides investments that are "always" or "never" plan assets, the underlying assets of certain investments will be plan assets if the investment meets all the following conditions.
The Investment:
is an "equity interest"
Is not a "publicly-offered securit
Equity Interest
Includes and ownership interest in a corporation, a profits interest in a partnership, an undivided ownership interest in property, and a beneficial interest in a trust. It excludes debt.
Publicly-offered security
is a security that is freely transferable, part of a class of securities that is widely held, and part of a registered class of securities.
Benefit plan investors
include plans covered by ERISA Title I, IRAs, Keogh plans, and entities holding plan assets to the extent held by "benefit plan investors." It does not include government plans and foreign plans. ERISA section 3(42).
Significant
Equity participation in an entity by benefit plan investors is "significant" if 25% or more of the value of any class of equity interests in the entity is held by "benefit plan investors.
Operating company
is a company primarily engaged, directly or through a majority owned subsidiary or subsidiaries, in producing goods or providing services. A company is not considered and operating company if it is engaged in the investment of capital, such as investing a
Operating Company
Also includes an entity which is a "venture capital operating company" (VCOC) and an entity which is a " real estate operating company" (REOC).*
*It is important to consult 29 CFR 2540.3-101 in determining these entities.
Venture capital operating company (VCOC)
At least 50% of its assets, valued at cost, are invested in venture capital investments and
The entity exercises substantial management rights in connection with one or more of its operating company investments.
Real estate operating company (REOC) if:
At least 50% of its assets, valued at cost, are invested in real estate which is managed or developed and with respect to which such entity has the right to substantially participate directly in the management or development activities and
The entity is e
Example2
Plan A invests in the common stock of corporation T. The stock is not a publicly-offered security and 35% of the equity interests of T is held by benefit plan investors. T engages in the production of office furniture.
The assets of plan A include the com
Plan P invests in the bonds of an unrated corporation T. The bonds but not the assets of corporation T, are plan assets of Plan P
(True) or False