To qualify for exception under the provisions of section 1917(d)(4)(C), a pooled trust must be managed by a non-profit association. By law, each trust beneficiary must have a separate account, but the non-profit manager can pool these funds with the funds of other members of this communal trust. In some instances, the non-profit manager(s) may employ the services of a for-profit entity to manage some of the financial activities of the trust.

Trusts are often complex legal arrangements involving State law and legal principles that a claims representative may not be able to apply without obtaining the advice of legal counsel. Therefore, the following instructions may only be sufficient to recognize that an issue is present that you should refer to the regional office (RO) for possible referral to the Office of Program Law. When in doubt, discuss the issue with the RO staff. You can resolve many issues by phone.

If a non-profit association employs the services of a for-profit entity, the non-profit association must maintain ultimate managerial control over the trust. The for-profit entity may handle certain trust functions on behalf of the non-profit association; however, the use of a for-profit entity must always be subordinate to the non-profit managers of a pooled trust under section 1917(d)(4)(C).

For example, the non-profit association must be responsible for:

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  determining the amount of the trust corpus to invest;

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  removing or replacing the trustee; and

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  making the day-to-day decisions regarding the health and well-being of the pooled trust beneficiaries.

NOTE: This list is not intended to be exhaustive. These are a few examples of the type of authority that must vest in the non-profit association.

Do not routinely question the relationship between the non-profit association and for-profit entities used by the pooled trust.

However, before excepting a pooled trust under section 1917(d)(4)(C), review the trust for any provisions that indicate the non-profit association has not retained sufficient authority over the pooled trust to meet the criteria in section 1917(d)(4)(C).

For example, a pooled trust may not meet the criteria in section 1917(d)(4)(C) if the trust includes a provision that allows the for-profit entity to determine whether to make discretionary disbursements from the trust.

Refer the pooled trust document to the regional office for evaluation if it appears that the non-profit organization may not have sufficient control over the management of the trust for the trust to be excepted under section 1917(d)(4)(C).