Using Plan Assets to pay Fees

[KateSmithPA]

Plan has not filed 5500's for 11 years. We have prepared the 5500's for these years and the plan will file under DFVC program. Employer will pay DFVC fees.

Our fee for the preparation of the 5500's is almost $15,000. Client wants to pay fees from plan assets. Although we agree the plan may be charged with normal fees for preparing 5500, is is alright to charge these fees against the current year assets when they pertain to the last 11 years?

Although the workforce was fairly stable over that time period, about half the participants left the plan and took distributions during 2004 as the result of one owner breaking away to start his own business. Therefore, the remaining participants will bear the cost.

[david rigby]

...is is alright to charge these fees against the current year assets when they pertain to the last 11 years?

What do you mean "charge"? Do you (TPA) work for the plan or the plan administrator? Is it not the plan administrator who decides whether to pay expense directly or have the plan pay some? Does this meet the DOL conditions for a settlor expense?

[mming]

Also, the plan document may state whether or not it can pay expenses (in conjunction with the DOL conditions).

The remaining participants bearing more cost than they ordinarily would have should not pose an operational failure. Although a 50% reduction in the number of participants is significant, there are some plans that charge the administration fees to those who are participants at the beginning of the year, regardless if anyone terminates during the year.

If this is a fee that can be paid by the trust and the document gives the administrator the choice of whether or not to charge the participants, the admistrator may consider having the participants pay only a portion of the fee in order to avoid personnel issues. I think that any expenses not paid by the plan can be a business deduction.

[Kirk Maldonado]

I thought (but didn't verify) that the DOL has said that you can't use plan assets to pay DFVC fees. If you can't use plan assets to pay the fees, isn't using plan assets to pay for preparing the filings circumventing that rule?

On the other hand, if the filing was done on a timely basis, the plan could pay for the preparation of the fiilngs, so why should it matter when the filings are prepared?

As usual, I have more questions than answers.