Charging Fees to participants in an "abandoned plan"

[Guest vqualplan]

The situation is a 401(k) plan in a nursing home was sold in an asset sale. The participants stopped participating in the "old" plan in the summer of 2003 and switched to the acquiring companies 401(k) plan.

There have been no contributions or distributions since 2003. The Form 5500 was not filed for 2003 because nobody was willing to pay the fee's to the auditor who pre-billed for their services. We are the TPA, and have not received payment for the 2003 audit package.

We have considered our firm no longer the TPA of record but a TPA's signature is needed to liquidate the individual participant accounts.

The acquiring entity does not feel they should have to pay for this old plan since it was an asset sale.

Would it be allowable to charge the participants our fees for administration and the auditor’s fees? It is my understanding that we can not charge the participants for any fees involved in the actual plan terminination. My concern is there are a lot of small balances which the fees could be a large percent of the total balance.

The other concern is there are people who want to get their money out of the plan.

Any advice would be appreciated. Thanks!

[david rigby]

... a TPA's signature is needed to liquidate the individual participant accounts.

What does this mean? What does the plan say?

[Guest vqualplan]

ING requires the Trustee and the TPA to sign on their distribution forms. The document says distributions as soon as administratively feasible after termination, death, disabilty, and retirement. Doc does not address fee's.

[RCK]

If this was an asset sale, there was someone who was selling those assets, and presumably got the check. What happened to them--it's still their responsibility.

RCK

[Kirk Maldonado]

There's some recent guidance from the DOL regarding the payment of plan expenses that might prove instructive on this point. You might want to also look at the recent DOL guidance on "orphan plans."

[Guest Pensions in Paradise]

Were the former owners participants in the plan? And if so, is their money still in the plan? If they already took out their money but left everyone elses money in the plan, then it is a breach of fiduciary duty and they would be personally liable if the participants were to file claims.

As RCK said, someone is still responsible.