When reviewing employee benefit account transactions, which deposits would not be criticized by a trust auditor?

When reviewing employee benefit account transactions, which deposits would not be criticized by a trust auditor?

• A. The deposits bear a reasonable interest rate and are authorized by the plan.
• B. The prohibited transactions are approved by the Trust Committee.
• C. The deposits are limited to 10% of the market value of plan assets.
• D. The deposits are consistent with the investment objectives of the plan.

Answer: (A)

Deposits that bear a reasonable interest rate and are authorized by the plan would not be criticized by a trust auditor because they align with the fundamental principles of trust management and compliance. In a trust environment, it is crucial that all transactions, including deposits, adhere to the specific terms outlined in the employee benefit plan. When deposits are authorized, it indicates that they meet the predefined criteria established by the plan, ensuring that they are legitimate and compliant. Additionally, a reasonable interest rate implies that the deposit is being managed prudently, providing value to the plan participants without exposing the trust to unnecessary risk. Maintaining compliance with these standards helps safeguard the assets of the plan and supports the fiduciary duty of those managing the plan. This means the transactions are accounted for and seen as part of sound financial management practices, which is critical during an audit. Understanding the importance of these principles assists in ensuring that deposits enrich the employee benefit account's value while remaining within the legal and regulatory frameworks that govern such financial practices.

Deposits that bear a reasonable interest rate and are authorized by the plan would not be criticized by a trust auditor because they align with the fundamental principles of trust management and compliance.

In a trust environment, it is crucial that all transactions, including deposits, adhere to the specific terms outlined in the employee benefit plan. When deposits are authorized, it indicates that they meet the predefined criteria established by the plan, ensuring that they are legitimate and compliant. Additionally, a reasonable interest rate implies that the deposit is being managed prudently, providing value to the plan participants without exposing the trust to unnecessary risk.

Maintaining compliance with these standards helps safeguard the assets of the plan and supports the fiduciary duty of those managing the plan. This means the transactions are accounted for and seen as part of sound financial management practices, which is critical during an audit.

Understanding the importance of these principles assists in ensuring that deposits enrich the employee benefit account's value while remaining within the legal and regulatory frameworks that govern such financial practices.