Plan Term Fees

[dmb]

Has there been a recent IRS ruling or document on plan term fees being paid from the plan for DC plans?? My understanding was that settlement fees could not be paid from the plan. Thanks.

[KJohnson]

This is more of a DOL issue than an IRS issue. The last thing I recall is a 1997 DOL letter that I think you can find at: www.dol.gov/dol/pwba/public/programs/ori/advisory97/97-03a.htm

There are rumblings that the DOL (especially the Kansas City office) is taking a much stricter view on what is a "settlor expense and what is a plan expense. I have even heard that they have stated that discrimination testing is a "settlor" function because continued qualification benefits the employer.

[Guest khaskell]

I am no aware of any new legislation regarding payment of expenses from plan assets and payment of "settlor" expenses from plan assets. ERISA sections 403©(1) and 404(a)(1)(A) both deal with fiduciary responsibility that an employee benefit plan must be held for the exclusive benefit of providing benefits to participants and beneficiaries and defraying reasonable expenses of administering the plan. Any distribution or payment from the plan otherwise would be in a violation. Settlor expenses, ie. employer charges for terminating a plan, are not administrative expenses so any payment would not be allowed under ERISA.

[Kirk Maldonado]

While I don't disagree with KHaskell, there are some functions regarding termination of the plan that are "settlor" functions and others that are "fiduciary" functions. There is a DOL Advisory Opinion that was issued several years ago that attempts to specify which functions are which in the context of the termination of a defined benefit plan.

[KJohnson]

Kirk should know, he got this whole thing rolling with a reqest to the DOL on the settlor/fiduciary distinction and plan costs back in 1987. I think his letter is cited in the 1997 advisory opinion I referenced in my prior post.