Using plan assets to pay consulting fees

[Guest April Smith]

Can the Trustees of the plan use plan assets to pay consulting fees.

Example: A consultant wants to examine the plan for a fee and the consultant said just use the plan assets to pay me. The consultants objective is to reduce plan costs to participants (ie. Lower expense ratios (costs) ) The consultant said take the money from participants accounts on a pro-rata basis, because expense ratios do the same thing. He went on to say if he couldn't show us how to reduce the costs by at least the amount of the fee that he would refund the money back to the plan.

Is it legal to use the assets in this way, if it will ultimately save the participants money? Is there IRS Code where this is explained? Can you put the money back?

[alanm]

The answer is in DOL field assistance bulletin 2003-3

[GBurns]

Are you saying that this consultant wants his fee in advance? Is this a flat fee or is it based on an hourly rate? If it is an hourly rate, How can he know how many hours it will take in advance of doing the job? If he can estimate the hours he certainly should be able to estimate the savings.

I know that quite often lawyers demand an upfront retainer, but that is then related to the eventual billed hours, however, this seems different and suspicious.

Didn't he provide any legal basis for deducting from the plan participant's accounts. If he did not give any legal basis, at least the DoL FAB, then I would question his ability etc.

[mbozek]

Anyone can recommend a reduction of expense fees by finding funds with cheaper ratios e.g., go to Vanguard or TIAA/CREF. That doesn't mean that participants will benefit from the change, e.g., cost of changing funds. Before you even consider this proposal why not read the plan document for the provision that says that a fiduciary must act in a prudent manner. You dont need a consultant to tell you which funds have the lowest fees- anyone can do that by checking morningside- Its part of being a fiduciary.

Remember Warren Buffets favorite saying " A fool and his money are soon parted"

[Guest April Smith]

Where can I find DOL FAB's?????

[david rigby]

http://www.dol.gov/ebsa/regs/fab_2003-3.html

[Guest April Smith]

Thank you Pax!