Service Providers Fees

[Guest Rich Jag]

I am a trustee on a health plan. I am aware of the DOL's position that service providers' fees must be reasonable. We have an attorney who charges a retainer. This retainer is IN ADDITION to any work done at an hourly rate. I'm not entirely sure what the retainer is for - just to keep him on the ready and answer any simple questions, I guess. Is this arrangement legitimate?

[jpod]

It can be legitimate, but as a Trustee you are certainly entitled to inquire. Ask for a copy of the attorney's retainer agreement, read it, and follow up with questions if you're not satisfied. If there is no written retainer agreement, there should be one, and you should start the process of securing one, so you will have accomplished something.

[Guest Sieve]

Of course, whether or not the attorney can charge fees in that matter does not answer the question of whether or not those fees are reasonable in amount. That is a facts & circumstances determination.

If you're trustee of a health plan, it's probably a collectively-bragained plan and the attorney is being paid with plan assets. However, if the attorney is not being paid with plan assets (e.g., an employer or the union is paying the legal bills from general assets), then there is no requirement that service provider fees be reasonable.

[Guest Rich Jag]

Of course, whether or not the attorney can charge fees in that matter does not answer the question of whether or not those fees are reasonable in amount. That is a facts & circumstances determination.

If you're trustee of a health plan, it's probably a collectively-bragained plan and the attorney is being paid with plan assets. However, if the attorney is not being paid with plan assets (e.g., an employer or the union is paying the legal bills from general assets), then there is no requirement that service provider fees be reasonable.

It is being paid out of plan assets. However, if there are no services being provided for the retainer (hourly fees are in addition to the retainer), how is this reasonable?

[Guest Sieve]

It may, in fact, not be reasonable. But, I guess I would look at the totality of the fees (retainer plus hourly fees) to determine that. For example, the hourly fees may be significantly reduced because a retainer is being paid, and, in spite of the retainer, the overall charges (for the year?) may be at or below the going rate. Some services may be provided without charge because of the retainer--i.e., the retainer perhaps is being used as a pre-payment to reduce the fees (as generally happens). So, I think the overall amount paid will determine what is reasonable.