Can DB plan trustee pay himself invest advisory fee

[JAY21]

Investment advisor structured as self-employed, who has his own DB plan, wants to know if he can pay himself the 1.5% advisory fee on certain investments if the plan invests the money with the firm he's associated with (sounds like the financial equivalent of a real estate agent structured as Independent Contractor but still associated with a real estate firm). There are no employees.

What I can find suggests that since he'd be the one appointing the investment manager (i.e., himself) that he does not qualify for the normal exemption for reasonable fees/services. However, I could swear I've seen in my pension lifetime people getting "Trustee fees" who were also 1-man plan/owners (of course those would all be takeover plans ;-).

Any thoughts or opinions as to whether he could get paid the 1.5% advisory fee ?

[Andy the Actuary]

Suppose this is not a prohibited transaction. What is the advantage? How much money could we be talking about? And, why aren't the Tigers hitting?

[Effen]

150 bpts? WOW! I wonder if he will also sue himself if his investments do poorly?

Maybe he should sell himself a 412(i) plan, he could make lots of money that way.

[jpod]

1. I think it is a per se pt with no available exemption.

2. I can think of only one reason why he might wish to do this: the DB plan is way overfunded and he fears the excise tax on termination. If that is his fear there might be other ways of helping him out with that issue that do not involve a pt. If overfunding is not an issue, what on earth is he trying to accomplish by this?

[JAY21]

The funny thing about it is his DB plan is new for 2008. I think he wants the investments with the company he's "associated" with, but can't stand the advisory/mgt fee going to someone else in the company other than himself. I can't find a PT exemption either, so I'm not thinking he can do it, but just wanted to make sure I hadn't missed some exemption others knew about.

[jpod]

There may be a pt if there are fees/commissions paid to the company he is associated with, or to someone working for that company, even if not him. Insofar as his concern is concerned, if he would be able to redirect the fees to himself, can't he just have the fees waived? All problems solved (his concerns and any pt concerns) if fees are waived.

[JAY21]

I'll see if he can get the fees waived, agree that takes care of the issue, though he made it sound like he was stuck paying the 1.5% advisory fee if he went with this investment through this investment company. Not sure if it's some private placement fund or what is going on with the fee.

[AndyH]

There could be other benefits to Mr. Investment Advisor other than the obvious fee. He could get "asset awards", or other less obvious benefits from this deal. I think you are asking for trouble unless you require him to get a legal opinion and do not complete Form 5500 for him without pointed questions that are directly answered by an informed client.