Plan Expenses

[Guest SSD]

In information published by the DOL, it seems that the payment of investment advisory fees with plan assets is o.k. However, what if a participant goes out on his own, hires an investment advisor to assist with his investments in his 401(k)? This plan is a participant directed 401(k) where all employees use the same 21 funds. The employee feels overwhelmed and has hired a personal investment advisor to review his 401(k) account and provide investment advice for a fee. All plan participants have this same opportunity to use an outside investment advisor. Can the participant ask that the fees associated with this be paid from his account balance? In other words, could the investment advisor fees be paid from his account when this is done on an individual basis, and not an employer initiated/plan basis?

[austin3515]

Interesting...

Whether its legal or not I don't know. But what an administrative nightmare.

As trustee/fiduciary/administrator, the sponsor must authorize all expenses of the Plan. It is also the sponsors responsibility to act prudently with respect to such decisions. How do they monitor a separate advisor for each participant, given that they're required to monitor such service providers? You'd have to look at all the fees they charge, make sure they charge a reasonable fee, and that they are qualified.

What a fiasco!

[Brian Gallagher]

i would say no. it is not an expense incurred by the plan. i would say that this advisor is neither a fiduciary nor party-in-interest.

if that was allowed, it would be like me signing up for the morningstar premium service and charging it to my 401k account. all the people in my plan have access to it, but certainly you would never consider morningstar a fiduciary who was providing investment advice to the plan.

[IRC401]

I thought that Morningstar was willing to be a fiduciary (per agreement with the plan sponsor, not the participants).

[Brian Gallagher]

They may be, but my point was that if I went and paid for their premium service, I couldn't charge that back to my 401(k) plan. Just like the example at the top, Morningstar would be providing participants with the advice, not necessarily the plan.

Maybe I should have used the Wall Street Journal as my example.