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ing, including generating and mailing
statements to Participants. Both func-
tions are often times performed by ei-
ther the same entity or by entities that
are closely related. However, there are
several large, nationally recognized re-
cordkeepers (and a plethora of smaller
ones) who work with unrelated banks
and trust companies to perform the
custodial function.
Safe Harbor Individual Accounts
Safe Harbor Individual Accounts (which
is NOT a term used in the regulations)
have the following characteristics:
Participants are permitted to di-
rect the investment of these ac-
counts; and
All investments are held by a cus-
todian that is a Regulated Financial
Institution and that institution sends
to the Participant, at least annually,
a statement of their account.
Note that this definition is much more
restrictive than that of Qualifying Plan
Assets. If the recordkeeping function
is fulfilled by an organization other than
the Regulated Financial Institution with
custody of the assets, the accounts will
not be considered Safe Harbor Indi-
vidual Accounts. Pooled accounts in-
vested at the direction of the Trustee(s)
will also never be considered Safe Har-
bor Individual Accounts.
Small Plan Audit Waiver
First and foremost, Small Plans invest-
ed exclusively in Safe Harbor Individu-
al Accounts are deemed to satisfy the
SPAW rules and do not need to comply
with any of the following requirements
(hence the "safe harbor" terminology).
All other Small Plans must satisfy a) the
"Investment/Bonding Requirements"
and b) the "Summary Annual Report
Disclosure" requirements.
Investment/Bonding Requirements
One of the following requirements
must be met to satisfy the Investment/
Bonding Requirements:
At least 95 percent of Plan As-
sets must be invested in Qualify-
ing Plan Assets or Safe Harbor In-
dividual Accounts; or
A fidelity bond must be obtained
with coverage equal to at least the
amount of those assets that are
neither Qualifying Plan Assets nor
Safe Harbor Individual Accounts.
This can be the same fidelity bond
generally required by ERISA it is
only the amount of coverage re-
quired that is altered.
Summary Annual Report Disclosures
The following disclosures must be in-
cluded in the Summary Annual Report
distributed to Participants. [The Sum-
mary Annual Report summarizes the
contents of the Form 5500]:
The name of the regulated finan-
cial institution holding Qualifying
Plan Assets (except for Safe Har-
bor Individual Accounts) and the
amounts held by each institution;
paid advertisement
Be diligent about determin-
ing whether or not the entity
mailing statements to par-
ticipants is the same regu-
lated financial institution
that is holding Plan Assets.
This represents the single
most substantial source of