Expenses related to real estate purchase by pension plan

[Gary]

Say a plan pays $150,000 in cash from the plan to purchase a piece of land.

However, there are closing costs, commissions, taxes, utilities, association dues, etc.

The plan sponsor isn't sure if this chould be paid out of corporate funds, pension assets or both.

My impression is that if no party-in-interest is benefiting from these payments, then it appears that these payments could be made out of corporate funds, since the pension is supposed to pay for reasonable administrative expenses only.

Any thoughts?

[JAY21]

It should all be paid out of the pension funds. This isn't the situation where the DOL is concerned with protecting participants from paying for company initiated actions (e.g., plan term expenses) rather this is a normal and ongoing maintenance expense of the underlying investment (probably not much different than a mutual fund expense fee). I suppose the company could pay the expense directly if it's clearly identified as an additional contribution being made to a "trust asset" (since the asset is in the trust it's probably considered deposited into the trust), and is also a legitimate contribution for all purposes (testing, deduction limits, etc...), but I think the paper trail is better to first depost it into the plan as a contribution, then write checks to cover the taxes/fees, etc. of the investment.

[Alf]

I think you have questions about it being a disquised contribution if paied by the sponsor. It is a trust expense and payments made by the sponsor should be nondiscriminatory and subject to deduction limits like other contributions.

[mbozek]

What does the plan document say about paying for these expenses?