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TPA Loan Fee in 403(b) - Reasonable?


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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. 

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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.

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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. 

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