Pensco IRA - Regulation D Investment Education Center

Regulation D Resources has partnered with Pensco Trust Company, one of the nations largest self-directed IRA custodians, to provide educational content and services related to self-directed IRA investments into Regulation D private placements.  This section of our client resource center has been developed to provide some basic knowledge to our clients regarding Pensco Trust Company, the services offered by Pensco Trust Company, summary information on IRA investment into Regulation D Offerings, a summary of the process for investment and transfer of custodial services, and contact information for a dedicated Pensco Trust Company representative.  We are providing this educational center to assist our clients executing offerings with the processing of self-directed IRA investment into their offerings.

Introduction

Because holding alternative assets in retirement accounts requires special knowledge and handling, many broker dealers don’t offer alternatives as an option for IRAs, that’s where we come in. Founded in 1989, PENSCO Trust Company is a regulated, self-directed IRA custodian with more than $10 billion in assets under custody and 50,000 clients.

PENSCO is the leading alternative asset custodian, with more than two decades of expertise in holding private equity, real estate, notes, and other non-exchange traded assets. Our services don’t end with individual investors, though. PENSCO Trust also provides solutions and services to Registered Investment Advisors, financial planners, investment sponsors, crowdfunding platforms and professional service providers seeking an alternative asset custodian for their clients.

Dedicated Experts

PENSCO experts review each new transaction to ensure proper custody of the asset and document IRA ownership for tax deferment and IRS reporting needs – over the lifetime of the asset. We have the knowledge needed to efficiently handle all aspects of account administration and as alternative asset experts we are able to guide clients through complex transactions within qualified accounts.

At PENSCO, we pride ourselves on delivering a premier level of service throughout the entire investment process. With 40,000 unique assets under custody – our service team offers custodial expertise on a broad range of alternative assets from real estate, private equity and everything in between.

 Pensco Trust Company Responsibilities

As a self-directed IRA custodian, PENSCO is responsible for facilitating the initial investment and administering the assets in our clients’ accounts over the course of the assets lifetime. We manage the extensive recordkeeping required by the IRS and handle the reporting of contribution, distribution and investment activity within the account, including quarterly reports, processing of annual asset valuations and other documentation.

Investors and their advisors — not the IRA custodian — are solely responsible for evaluating the investment’s merits and suitability. PENSCO’s role is to determine if the investment may be administered in a self-directed IRA. We do not approve or endorse the actual investment.

The self-directed IRA investment Process

PENSCO experts review each new transaction to ensure proper custody of the asset and document IRA ownership for tax deferment and IRS reporting needs – over the lifetime of the asset.

IRS rules stipulate that any improper use of a tax-advantaged account by the owner, beneficiary or a disqualified person is a prohibited transaction. During the investment review, PENSCO examines the transaction for specific issues as:

  • Self- dealing. This refers to transactions that benefit the account owner, direct family or the account owner’s business. For Regulation D transactions, this means that the account owner cannot hold equity shares of his/her own business or that of any disqualified person in an IRA or other tax-advantaged retirement account.
  • Disqualified persons. Examples include:
    1. Members of the account owners family who are direct lineal ascendants (e.g., mother, grandfather)
    2. Members of the account owner’s family who are direct lineal descendants (e.g., children, grandchildren)
    3. The account owner’s spouse and the spouses of direct lineal descendants
    4. The account owner’s fiduciary, including anyone with discretion or authority in managing the account owner’s IRA.

Required Paperwork

The review phase is essential for investments that are new to PENSCO to ensure we can custody the asset and properly document IRA ownership for tax deferment and IRS reporting needs. If your investment has been previously reviewed by PENSCO and was deemed administratively feasible, the process will be more abbreviated. PENSCO can begin the review process once we have received:

  • 1. Alternative equity investment notification form. This form collects information and provides requirements for holding equity investments at PENSCO. It must be completed and signed by the general partner, managing member, fund manager, corporate officer or authorized individual for one of the aforementioned.
  • 2. Offering materials. PENSCO will ask you to provide any memorandums, prospectuses, subscription agreements and other documentation pertaining to the offering.
  • 3. Alternative equity investment authorized form. This form provides PENSCO with the instructions needed to complete the transaction once paperwork is complete and funds are in the account.
  • 4. Subscription agreement/ enrollment documents. This document is provided by the private placement company, then completed and signed by the account owner.

Transfer Process – Transferring Custodial Services to Pensco Trust Company

In general the following are the steps required to purchase a private equity investment:

  1. Open an account using our on-line New Account Wizard found at www.pensco.com
  2. Fund the account. Timing of funds varies based on where the money is coming from. Transferring cash from another IRA at a brokerage house will be much faster than making a rollover contribution from a 401(k).
  3. Conduct administrative review. After the necessary paperwork is submitted, PENSCO will conduct the custodian review in as little as five days (note that PENSCO does not evaluate or provide due diligence on the quality of the investment or investment sponsor, but rather reviews the investment for the ability to custody the asset within an IRA.)
  4. Complete the investment. PENSCO will complete the transaction when all the paperwork and funding is in place.

Funding Method/Timeframes

Cash Transfer: Cash transfers are the safest, easiest and fastest way to fund an IRA.  A transfer entails moving cash directly from one IRA to another like IRA (e.g., traditional IRA to PENSCO traditional IRA).  There’s no limit to the number of transfers that can be requested and because the account holder never takes physical receipt of the money, a transfer does not create a taxable event.

For cash transfers, PENSCO will request the funds from your current custodian on your behalf, and the transfer typically takes three to four business days.

In-Kind Transfer: If you don’t wish to liquidate an asset before transferring it, you may be able to do an in-kind transfer of the asset from another IRA to your like PENSCO IRA. The process can take longer than a cash transfer and alternative assets must be reviewed by PENSCO.  You will also need to check with PENSCO first to ensure we can hold the asset in question – if not, you may need to liquidate the asset and transfer the cash instead.

Pensco Trust Company Professionals – A Dedicated Team

When you refer your clients to PENSCO they’ll gain access to a team of experts that will guide them through the process. From account opening to funding and on-going maintenance, your clients will experience a seamless investment experience.   Based on your clients specific investment they will be assigned a team that will work with them throughout the life of their investment.

Fees

At PENSCO, we believe that custodial service fees should be transparent to all our clients and should reflect the level of service and value we provide. Our fee schedule varies based on investment type, but essentially there are four types of service fees:

  • (a) One-time Account Establishment ($50)
  • (b) Quarterly Account Administration and Maintenance (starts at $50 quarterly)
  • (c) Account Transactions (from $10 per transaction to $75 per hour)
  • (d) Account Closures and Transfers Out (one-time charge of $100 – $225)

Contact Pensco

Interested in referring an investor client to Pensco Trust Company?

Contact us with questions or to schedule a call with one of our representatives: