Custody/Master Trust

A Master Trust is actually an accounting convenience, supported by a legal device. A company that sponsors more than one employee benefit plan—or a group of companies under common control—may combine the assets of some or all of the plans into a combined trust account, generally called a "master trust." 

From an accounting standpoint, it aggregates the positions and transactions of multiple plans, simplifying government reporting and communications with investment managers.  Each participating plan retains an undivided interest in the assets of the trust, expressed either as a dollar value or units of participation. 

Legally, a Master Trust (also referred to as a "group" trust) is formed by a separate arrangement that brings together the assets of multiple plans, allowing them to share the benefits of common investment management approaches, securities processing, and accounting—while still retaining their status as individual plans/trusts.  

A Master Trustee is the entity designated as trustee for the plans covered in the master trust. Frequently, the master trustee is the bank that provides the accounting services, as well as a variety of securities custody processing services for the plans.  The Master Trustee/Custodian has systems that will allow multiple plans of the same employer to share access to investment managers and receive combined reporting for all plans, as well as tracking the proportionate share and return of each individual plan in the combined master trust. 

A Master Custodian is essentially identical to a Master Trustee in all operational aspects, but without the legal designation as trustee for the assets. As such, they will generally receive and accept the directions of the appointed trustee in dealing with the assets of the plans.  It is the custodial part of the responsibilities that generate the most activity. Custody services frequently include, among other things: 

• Income collection and processing,
• Corporate actions processing,
• Asset custody (physically, or electronically in a designated securities depository),
• Settling trades initiated on behalf of the trust.