Plan Reimbursement of Plan Sponsor

[Jeff Kirtner]

In light of Field Assistance Bulletin 2003-3, Plan Sponsor would like to charge applicable plan expenses to severed, vested participants who leave their money in the plan, but pay all other plan expenses itself. For administrative convenience, Plan Sponsor would like to pay plan expenses as follows: (a) Plan Sponsor would pay all plan expenses throughout the year; (b) at year end, accounts of severed, vested participants would be charged a pro-rata share of expenses; © the plan would reimburse the Plan Sponsor for the amount in (b) by writing a check to the Plan Sponsor. I am concerned about step ©, and specifically concerned that it is a prohibited transaction for which no exemption exists. For example, one could characterize the Plan Sponsor's advance payment of expenses as a loan to the Plan. Furthermore, while there is a prohibited transaction exemption for reimbursement of direct expenses incurred by a fiduciary in providing services to the plan, in the situation outlined above the Plan Sponsor is not providing services, it's just paying plan expenses, so I'm not sure the exemption applies. Does anyone have authority indicating whether the above method of paying plan expenses is or is not acceptable?

[Kirk Maldonado]

What about the exemption for interest-free loans?