Under such an agreement, a custodian bank may be required to notify the Internal Revenue Service of any distribution of the accounts or assets it supervises. However, it is not necessarily the duty of the depositary to explain why the distribution was made. For example, when an employee with a health savings account receives a distribution, the employee may take responsibility for investigating whether it was used for what is considered a qualified medical expense. A custody contract is an agreement in which an asset or real estate is held in the name of the beneficial owner (beneficial owner). These agreements are usually entered into by public bodies or companies to manage different benefit programmes. Deposit agreements are used for a large number of benefit programs such as LSIs and health savings accounts. As a rule, the agreement describes the payment by the person that is paid to the custodian bank, which, in turn, ensures that the funds are held with a bank or other financial institution. Depending on the nature of the account, the custodian bank may not be held liable if the worker`s employer does not provide the necessary resources for the service. For example, if a company does not contribute to a retirement plan, any losses are not the responsibility of the custodian bank. In the case of deposit agreements used for benefit programs, the custodian raises funds from staff through regular salary deductions and invests the money; All fees related to these agreements are generally lower than those that would be charged to each investor. An example of a deposit agreement would be an occupational retirement plan. Many, if not most, companies mandate a third party to manage such plans to collect payments from the employer and workers, invest the funds, and pay the benefits. The advantage of this agreement is that the beneficial owner receives professional advice, which saves time and often reduces costs only if the money was otherwise managed by each owner.
The employee, not the custodian, may be required to keep all records confirming that the distribution has been exempt from tax….