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
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