Jump to content
Sign in to follow this  
beartd

TPA Loan Fee in 403(b) - Reasonable?

Recommended Posts

I have a 403(b) Plan with a TPA which charges 3% of the loan balance annually as their loan fee.  I have never heard of a loan fee based upon loan amount.  On its face, this appears unreasonable.  However, I wanted to ask the group if they had seen loan fees set up in this way.  I am more used to seeing a set fee for loan initiation (around $100-$150) and an annual maintenance fee (around $25).  Any feedback would be appreciated. 

Share this post


Link to post
Share on other sites

Is that 3% per annum?  So 0.75% per quarter?

In any event, it would be pretty steep.  For a $50,000 loan, the fees during the first year would total over $1,000!!!

Share this post


Link to post
Share on other sites

I've never seen a fee this high. If the maximum participant loan allowed by the plan is $5,000 or something like that, then maybe ok.

Share this post


Link to post
Share on other sites

My view is that it is unreasonable.  What is the link between the fee and work performed by the TPA?  Much greater than anything I see.  Perhaps it is a fiduciary breach for the Plan administrator or other responsible fiduciary to allow it.

Share this post


Link to post
Share on other sites

I think part of the determination of reasonableness has to include a consideration of what is the typical or average fee that is charged for that service in the market place.  So, based on that criteria, I think it would be easy for participants to claim that they are being charged an unreasonable fee for this service.  3% is pretty steep and not what I typically see in the market. 

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×
×
  • Create New...