dol position on distribution fees

[k man]

FAB 2003-3 which came out in may, 2003 provides that fees for distrubutions can be charged to participants when distrubutions are paid on a periodic basis.

Benefit Distributions. Some plans provide for the imposition of benefit distribution charges on the participant to whom the distribution is being made. These charges may be assessed for benefit distributions paid on a periodic basis (e.g., monthly check writing expenses). ERISA does not specifically preclude the allocation of reasonable expenses attendant to the distribution of benefits to the account of the participant or beneficiary seeking the distribution.

certain commentators have said they were not sure if this applied to lump sum distributions. does anyone have an opinion on this?

[mbozek]

I havent seen any commentary like that. The FAB states that plans may provide for allocation of expenses to the account of an individual participant and uses monthly check writing fees as an example of an expense that can be charged to a participant's account.

[k man]

we have some sponsors that want to continue to charge participants for all distributions including lump sums. would you let them do it in light of the FAB?

[mbozek]

As long as the fee is reasonable and disclosed in the SPD. FAB permits charging expenses against the accounts of individual participants because of the utilization of a plan service.