Payment of GUST/EGTRRA expenses from plan assets

[Guest AndyL]

A client just asked me whether the fee that a TPA charges a client to amend and restate a document for GUST can be paid from plan assets. He also asked the same question regarding the preparation of the EGTRRA good-faith amendment.

Can clients pay the TPA's fees from plan assets, assuming the plan document permits expenses to be paid from the trust?

(Assume the client is using a prototype, so IRS fees are not an issue.)

[Lynn Campbell]

The most recent documentation from the DOL on this that I can find is PWBA Advisor Opinion 2001-01A. This advisory seems to say that it would be OK to pay the expenses of the plan amendments which are required to maintain tax-qualified status. However, if the amendments include analysis of options for amending the plan from which the plan sponsor makes a choice, the expenses incurred in this analysis would be "settlor expenses" which must be paid by the employer.

[AndyH]

Andy, I just happened to research this today (ad nauseum) and I agree completely with the response from Lynn Campbell.

[david rigby]

And ultimately, this is a decision that the plan sponsor must stand by, with advice from counsel. The decision does not belong to the TPA, etc.

[Belgarath]

In a twist on this whole issue, our administrative service contracts are with the employer, not the Trustee. Technically, one could argue that since the employer is obligated to pay the fee, that it is impermissible for the plan to pay it since it is an indirect reversion of assets to the employer, relieving the employer of an obligation to pay. It could only be paid by the plan if the contract is with the Trustee rather than the employer. But I agree with PAX - it is their decision, and if the Trustee directs that it be paid from plan assets, although we don't recommend it, it ain't our problem...