IRS Allows for Commingling of Assets in Group Trusts

The Internal Revenue Service has issued Revenue Ruling 2011-01, modifying the rules for group trusts.

Beginning on January 10, 2011, the assets of qualified plans under statutes 401(a) and 457(b) may be pooled in a group trust. This revenue ruling, with the assets of custodial accounts under § 403(b)(7), retirement income accounts under §403(b)(9), and § 401(a)(24) governmental plans will not effect the tax status of the group trust or the tax status of each of the separate group trust retiree benefit plans. 

The IRS said a custodial account under § 403(b)(7) will fail to satisfy § 1.403(b)-8(d)(2)(i) if the assets of the account are invested other than in the stock of a regulated investment company, and any group trust in which the assets of a § 403(b)(7) custodial account is invested must comply with this restriction. Accordingly, as a result of this investment restriction, the assets of a custodial account under § 403(b)(7) generally will be combined in a group trust that solely contains the assets of other § 403(b)(7) custodial accounts.  

The ruling lists the requirements for the tax status of the group trust to be derived from the tax status of the participating entities to the extent of their equitable interests in the group trust.   

Revenue Ruling 2011-01 is here.