Guest djsimonetti Posted February 6, 1999 Posted February 6, 1999 Client has 401(k) plan which provides for quarterly investment changes and quarterly participant reports. Client wants to permit participants to make investment changes more frequently but at their expense. Investment manager proposes to charge a flat fee for each additional change (eg, $200 per change). Client also wants to let participants request "enhanced" reporting which would include info not required in standard reports(eg, performance of participant's account versus S&P 500). Again, participants would have to pay a flat fee ($200) for each enhanced report. I believe that the fees (if reasonable) can be paid by plan an charged against accounts of appropriate participants. Is ther any discrimination problem because the HCEs (who likely have the larger balances) can more easily afford the fees?
david rigby Posted February 6, 1999 Posted February 6, 1999 Can you say "daily"? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Guest djsimonetti Posted February 6, 1999 Posted February 6, 1999 Yes, I can but the investment manager cannot. It only offers a balance forward program but is working with client to produce a "virtual" daily valuation program by offering more frequent investment changes and enhanced reporting to those participants who are willing to pay the added cost from thei account balances. As I said, assuming the fees charged are reasonable and, therfore, can be charged against the participants' acconts, is there any discrimination problem? I don't think so but there is not much guidance out ther on this particular aspect of the broader plan expense issue. ------------------
Guest Mike Kimball Posted February 8, 1999 Posted February 8, 1999 I think you would have a hard time arguing this not discriminatory under the "rights and features" of 401(a)(4). This is especially true today since the client has so many other options ("daily" systems, or even individual accounts with mutual fund family). I suggest the client look around for investment vehicle and tpa that accomodates this, then problem goes away. Do they not have a fiduciary responsibility to run the plan "for the exclusive benefit of the participants?"......not the best interest of the investment manager who can't offer daily vals?
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