rmd: payment of expenses

[Guest amy darnell]

third party administrator will charge $50 to calculate rmd, can this expense be charged to the participant rather than treated as a plan-level expense?

[Michael Devault]

Good question... tough to answer. What does the plan document say (if anything) about administrative charges? Does the agreement between the TPA and employer address this issue?

If it's a mandatory charge, I would think that it would be a plan expense. In other words, if the employee chooses to calculate his or her own RMD to save the $50, but the TPA insists on performing their own calculations, it would likely be a plan expense. If, however, the TPA will accept the employee's numbers, it would seem that the TPA is offering the employee a service and could charge them the fee for such.

Sorry I don't have any more difinitive information. Maybe others will provide you with more solid replies.

[Guest amy darnell]

thanks for your response, michael.

the agreement between the tpa does not address this & they will accept calculations from another source (employee, employee's cpa, etc.). my assumption was the same as yours, that in light of them accepting other calculations, it could be considered a participant expense if he/she engages the service of the tpa to do so.

the document addresses that the plan expenses include all those incident to the plan administrator's functions, including but not limited to fees of actuaries, counsel, investment advisors & other specialists.

open to additional feedback.

[Michael Devault]

What if the employee refused to calculate the RMD? The plan is still required to make distributions in amounts that satisfy section 401(a)(9). That seems to put the burden back on the employer, making it a plan expense.

I'm not sure there is a correct answer. However, if I were the plan administrator, I would think it advisable for the TPA to perform the calculations, at the plan's expense, just to ensure that the amount distributed is correct. $50 is a small price to pay to make sure plan benefits are paid properly. Plus, it's a deductible expense to the company, reducing the after-tax cost.