Transfer between related group trusts was not an impermissible assignment

Plain-English summary

A qualified retirement plan wanted to move its investment from one bank-sponsored group trust fund to another. Both the active and passive funds were Revenue Ruling 81-100 group trusts, both invested in the same underlying group trust, and the same bank served as trustee. The transfer would redeem the plan's proportionate units in the underlying trust from the active fund and immediately contribute them to the passive fund. Because the plan's indirect interest in the underlying trust would remain a plan asset and remain subject to the same assignment restrictions, the IRS ruled that the transfer was not an impermissible assignment under Revenue Ruling 2011-1. The underlying trust therefore would not lose group-trust qualification merely because of the transfer.

Ruling snapshot

• Question: Does moving a retirement plan's proportional interest in an underlying group trust from an active fund to a passive fund violate the group-trust anti-assignment rule?
• Outcome: approved
• Key authorities: IRC §§ 401(a), 501(a); Rev. Ruls. 81-100 and 2011-1

Full text (IRS public release)

  Internal Revenue Service                                     Department of the Treasury
                                                               Washington, DC 20224

  Number: 202417010                                            [Third Party Communication:
  Release Date: 4/26/2024                                      Date of Communication: Month DD, YYYY]
  Index Number: 401.00-00
                                                               Person To Contact:
  --------------------------------------                       ---------------------,
  ------------------------------------------------------------ ID No. ------------------
  -----------                                                  Telephone Number:
  ------------------------------------------------------------ --------------------
  -------------------------------------------------------      Refer Reply To:
  -----------------------                                      CC:EEE:EB:QP1
  ----------------------------------                           PLR-115761-23
  In Re: --------------------------------------------------- Date:
  ------------                                                 January 29, 2024




Taxpayer                 =     --------------------------------------------------------------------------
                               ---------------------------------------------
Bank or Trustee          =     ---------------------------------------------
Active Fund              =     -----------------------------------------------------------
Passive Fund             =     ---------------------------------------------------------------------------
Determination            =     ---------------------------------------------------------------------------
Letter                   =     --------------------------------------------------------------------------

Dear -------------------:

This letter is written in response to your request ----------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------that
the IRS rule that the transfer of a group trust retiree benefit plan’s interest in one 81-100
group trust to another 81-100 group trust, both of which are participating trusts in
Taxpayer, is not an impermissible assignment under Rev. Rul. 2011-1, 2011-2 IRB 251.

FACTS
You have represented the following facts:
Bank sponsors and is the trustee of Taxpayer, which is a collective trust described in
Rev. Rul. 81-100, 1981-1 C.B. 326, as modified by subsequent guidance (“81-100
group trust”), that invests in U.S. real estate across many categories. Taxpayer is
available for investment only to investors that are certain types of qualified retirement
plans and governmental plans, and to other 81-100 group trusts with assets that are
exclusively the funds of such qualified retirement plans and governmental plans.
Taxpayer is available both for direct investment by eligible plan investors, and as an
investment fund available to other 81-100 group trusts under a fund of funds structure
PLR-115761-23                                       2

each of which is sponsored by Bank and managed and administered by Bank as
trustee.
The Active Fund and the Passive Fund, both of which invest in Taxpayer, are
themselves 81-100 group trusts available only to qualified defined contribution
retirement plans and governmental plans. The Bank serves as Trustee of both the
Active Fund and the Passive Fund as well as of Taxpayer. The Passive Fund uses
similar investment strategies, including asset class allocations, to the Active Fund, but
with lower-fee underlying index fund investments for the equity asset class. When a
redemption request is placed by a retirement plan investor with either the Active Fund or
the Passive Fund, that fund will typically then request a redemption from Taxpayer.
Taxpayer’s Declaration of Trust provides that a distribution may be paid in cash or in
kind (or partly in cash and partly in kind), equal to the value of the investor’s
participation on the date as of which such withdrawal is effective. Taxpayer’s
Declaration of Trust also provides that none of the assets of Taxpayer, nor any
participation or any interest in Taxpayer, shall be subject to assignment by or with
respect to any participating trust, plan, plan participant or beneficiary. Taxpayer has
received a Determination Letter from IRS finding that the terms of the Declaration of
Trust comply with the requirements of Rev. Rul. 81-100.
An unaffiliated U.S. qualified retirement plan under section 401(a) that is funded by a
trust exempt under section 501(a) (the “Plan”) has requested to reallocate from its
investment in the Active Fund into the Passive Fund. To comply with the Plan's request
to move from the Active Fund to the Passive Fund, the Active Fund will place a
redemption request for the Plan’s position in Taxpayer in the form of units of Taxpayer
representing the Plan's proportionate interest in Taxpayer, and the proceeds will be
immediately recontributed to the Passive Fund (“Transfer”).

RULING REQUESTED
You have requested a ruling from the IRS that the Transfer is not an "assignment"
within the meaning of Requirement (7) of Rev. Rul. 2011-1, such that it will not cause
Taxpayer to fail to qualify as an 81-100 group trust within the meaning of Rev. Rul.
2011-1.

LAW AND ANALYSIS
Rev. Rul. 81-100, as modified,1 provides that certain retiree benefit plans and other
arrangements are permitted to pool their assets for investment purposes in an “81-100
group trust” if certain specified requirements are satisfied. These retiree benefit plans
and arrangements, known as “group trust retiree benefit plans,” are qualified retirement
plans under § 401(a) of the Internal Revenue Code (Code); governmental retiree benefit
plans under § 401(a)(24); certain custodial accounts under § 403(b)(7); retirement

1
  Rev. Rul. 81-100 has been clarified and modified by Rev. Rul. 2004-67, 2004-2 CB 28; Rev. Rul. 2011-
1; Notice 2012-6, 2012-3 IRB 293; and Rev. Rul. 2014-24, 2014-37 IRB 529. Rev. Rul. 81-100 is itself a
restatement of the rules governing group trusts under Rev. Rul. 75-530, 1975-2 CB 146, and Rev. Rul.
PLR-115761-23                                          3
56-267, 1956-1 CB 206.

income accounts under § 403(b)(9); IRAs that are exempt under § 408(e); eligible
governmental plan trusts or custodial accounts under § 457(b); and plans described in
section 1022(i)(1) of the Employee Retirement Income Security Act of 1974, Pub. L. 93-
406, 88 Stat. 829, as amended.
Rev. Rul. 2011-1, as modified, requires in relevant part that a group trust instrument
“expressly [prohibit] an assignment by an adopting group trust retiree benefit plan of any
part of its equity or interest in the group trust (“Requirement 7”).” 2 The Declaration of
Trust prohibits the transfer or assignment of assets or an interest in Taxpayer by or with
respect to any participating trust. Taxpayer has received the Determination Letter from
IRS finding that the terms of the Declaration of Trust comply with the requirements of
Rev. Rul. 81-100, including the anti-assignment rule.

Rev. Rul. 2011-1, as modified, also requires in relevant part that “the group trust [be]
itself adopted as a part of each adopting group trust retiree benefit plan (“Requirement
1”).” You have represented that the Plan is a participating plan in the Active Fund, which
is an 81-100 group trust. As such, the Plan must, under Requirement (1) of Rev. Rul.
2011-1, adopt and incorporate by reference the terms of the Active Fund. In turn, the
Active Fund is a participating trust in Taxpayer and, as such, must adopt and
incorporate by reference the terms of the Declaration of Trust. The Passive Fund, which
is also a participating trust in Taxpayer, is similarly required to adopt and incorporate by
reference the terms of the Declaration of Trust.

The Plan invests in Taxpayer, albeit indirectly, through the Active Fund. Following the
Transfer, the Plan’s investment in Taxpayer would continue indirectly through the
Passive Fund, which is also an 81-100 group trust and is subject to the same
restrictions on assignment as the Active Fund. Thus, the Plan’s interest in Taxpayer
would remain an asset of the Plan following the Transfer. Accordingly, the Transfer is
not an impermissible assignment by the Plan of its interest in Taxpayer within the
meaning of Requirement (7) of Rev. Rul. 2011-1.

HOLDING

The Transfer is not an impermissible assignment within the meaning of Requirement (7)
of Rev. Rul. 2011-1 and, as such, Taxpayer does not fail to qualify as an 81-100 group
trust within the meaning of Rev. Rul. 2011-1 with respect to Requirement (7) merely on
account of the Transfer.



2
  The anti-assignment rule of Requirement (7) of the revenue ruling is distinct from the anti-assignment
and anti-alienation rule of section 401(a)(13). Requirement (7) is a modified restatement of the anti-
assignment rule under Requirement (4) of Rev. Rul. 81-100 (“[t]he group trust instrument prohibits
assignment by a participating individual retirement account or employer's trust of any part of its equity or
interest in the group trust”), which in turn is a modified restatement of that requirement under Rev. Rul.
56-267(“[t]he group trust instrument prohibits assignment by a participating trust of any part of its equity or
interest in the group trust… ”).
PLR-115761-23                                  4

The ruling contained in this letter is based upon information and representations
submitted by Taxpayer’s authorized representatives and accompanied by a penalties of
perjury statement executed by an appropriate party, as specified in Rev. Proc. 2023-1,
2023-1 I.R.B. 1, § 7.01(16)(b). This office has not verified any of the material submitted
in support of the request for ruling, and such material is subject to verification on
examination. The Associate office will revoke or modify a letter ruling and apply the
revocation retroactively if there has been a misstatement or omission of controlling
facts; the facts at the time of the transaction are materially different from the controlling
facts on which the ruling was based; or, in the case of a transaction involving a
continuing action or series of actions, the controlling facts change during the course of
the transaction. See Rev. Proc. 2023-1, § 11.05.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

This ruling letter is directed only to the taxpayer requesting it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to each of your authorized representatives.

                                           Sincerely,



                                           Diane S. Bloom

                                           Senior Advisor, Qualified Plans Branch 1
                                           Office of the Associate Chief Counsel
                                           (Employee Benefits, Exempt Organizations,
                                           and Employment Taxes)

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