I write in response to your letter of May 22, 2009, concerning the IRS' process for approving businesses to act as nonbank trustees or custodians for individual retirement accounts.
The rules governing taxpayer privacy preclude us from discussing any specific nonbank trustee application. However, we can provide general information concerning the nonbank trustee application requirements and process.
As you know, a business that is not a bank may apply to the IRS for approval to act as a nonbank trustee. The applicant must demonstrate that it complies with the requirements set forth in section 1.408-2(e) of the Income Tax Regulations. These requirements are designed to ensure, among other things, that the applicant has the fiduciary capacity, skill, and resources to act as a nonbank trustee.
The IRS processes every nonbank trustee application under the same procedures. The application must be submitted pursuant to Revenue Procedure 2009-4, 2009-1 I.R.B. 118. This Revenue Procedure sets forth the standard procedural requirements applicable to all private letter ruling requests involving employee plans matters, not just nonbank trustee applications. Thus, an applicant must submit complete information and documentation in support of its application. Importantly, the applicant must personally sign a statement under penalties of perjury which attests that the application "...contains all of the relevant facts relating to the request, and such facts are true, correct, and complete."
The IRS reviews the application to ensure that it satisfies all of the requirements of the regulations. This review covers, for example, the applicant's ownership structure to ensure that it has sufficient continuity and diversity to ensure that it will be able to continue in business after the death or change of its owners; the applicant's certified financial statements to ensure that it meets the net worth standards in the regulations; and the applicant's rules of fiduciary conduct. The IRS often asks for additional information and documentation during its review. If the applicant satisfies the regulatory requirements, the IRS issues a letter approving the application. If the applicant fails to satisfy these requirements, the IRS rejects the application.
If you have any questions concerning this matter, please contact me (Identification Number 100091286) at (202)-283-9508.
Sincerely,
William Hulteng, Manager Employee Plans Technical
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