Distribution Fees

[Guest gpg]

DOL Adv. Op. Ltr. 94-32A generally describes receiving a distribution from a retirement plan as an ERISA protected right, then goes on to say that you cannot charge a participant directly fees for an ERISA right (can charge to remaining assets of plan). However, some mutual fund and annuity companies charge fees directly to participants taking termination distributions. What is the basis for this? Does having a segregated, self-directed account make a difference?

[Guest mo]

A surrender charge or transaction (i.e. sales) fee is probably okay but a processing charge is probably not okay. Mutual fund and insurance companies that maintain this practice are taking their own chances. The amount is generally low (I have seen $10 as typical) and I don't know if that will matter in the final analysis.

[Guest GregSelf]

I'm having trouble with this. My search keeps referencing ERISA Op Ltr 94-32A, which relates strictly to QDRO's. Is this what you're referring to? If not, can you email me the text? My email address should be available in my profile.

Thanks.

[Guest mo]

There is a decent summary of this issue in the ERISA Q & A Column (Q39) on Benefitslink.