Pursuant to Treas. Reg. §1.408-2(e), an entity that is not a bank (or, in the case of Archer medical savings accounts and health savings accounts, not a bank or an insurance company) must receive IRS approval to serve as a nonbank trustee or custodian of the following types of tax-exempt trusts or accounts:

• Archer medical savings accounts;
• Health savings accounts;
• Custodial accounts of retirement plans qualified under §401;
• §403(b)(7) custodial accounts;
• Trusts or custodial accounts of individual retirement arrangements (IRAs) and Roth IRAs;
• Coverdell education savings accounts; and
• Custodial accounts of §457(b) eligible deferred compensation plans.

If the IRS approves an entity's application, it will issue a written notice of approval that will state the effective date of the approval. A prospective nonbank trustee or custodian may not accept any fiduciary account before the effective date of the approval. Before accepting any fiduciary account, an approved nonbank trustee or custodian must furnish a written copy of the notice of approval to the plan administrator or the person for whose benefit the account is established. The notice of approval is not an endorsement by the IRS of any investment selected, or made, by the nonbank trustee or custodian.

Additional Information

• Published guidance:
  • Treasury Regulations §1.408-2(e)
  • Revenue Procedure 2009-4, §3.09
  • Revenue Procedure 2009-8, §6.01(8)
  • Announcement 2007-47
  • Internal Revenue Manual – Nonbank Trustee Investigation Procedures
• Application procedures for prospective nonbank trustees and custodians
• List of nonbank trustees and custodians and recent updates