401(k) fee disclosure continued to be in the news when the Department of Labor recently extended the deadline for the required annual fee disclosures for participants. I’ll skip the technical stuff, which you can find in Field Assistance Bulletin No. 2013-02.

But I will use the occasion as a reminder that an employer has to know not just where the fees come from but how they can be used.

Let’s start with the fee basics of ERISA. A fiduciary must “act for the exclusive purpose of providing benefits to plan participants and defraying reasonable expenses of administering the plan.” The Department of Labor says that reasonable administrative expenses could include:

  • Plan amendments required by change in law
  • Plan amendments necessary to maintain tax qualified status
  • Nondiscrimination testing
  • Recordkeeping
  • Plan accounting
  • Preparation of Form 5500

However, plan assets cannot be used for “Settlor Functions,” that is, those expenses that are for the benefit of the employer. Settlor Expenses could include:

  • Terminating a plan
  • Testing to explore plan design
  • Union negotiations about plan provisions

What’s the takeaway here? Best practices would be for the plan to proper document how expenses will be handled in the Plan document, in the Summary Plan Description, and to have a written Expense Policy.
This article is for informational purposes only.  Plan Sponsors should always consult with their ERISA attorney for the application of the ERISA rules to their situation.

Jerry Kalish is an Advisory Board member for Employee Benefit Adviser and President of National Benefit Services, Inc., a Chicago-based third party administrator. He is a Guest Lecturer at John Marshall School of Law LLM Program in Employee Benefits and services on the Great Lakes IRS Advisory Council for Tax Exempt and Government Entity Plans. Jerry has been publishing The Retirement Plan Blog since 2006. He can be reached via email at mailto:jerry@nationalbenefit.com and followed on Twitter.



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