Can we pay for GUST restatement out of plan assets?

[KJohnson]

Look at DOL Opinion letter 97-03A. At least in the single employer context, DOL apparently takes the position that amending a plan may be a "mixed" funciton benefitting both plan participants and the plan sponsor. My recollection of this Opinion Letter is that if you have the same "decision maker" paying the plan's bills and the employer's bills, then there is a conflict and an "independent fiduciary" may be required to allocate expenses betweent he plan and the employer

Unless you have very large counsel bills, this makes paying the expenses out of the plan impractical.

[chris]

Can fees/expenses for restating our plan be paid from the general plan assets?

[Alf]

First, of course, check the plan document to see what it provides.

Second, GUST amendments (or any compliance amendments required to maintain the plan's qualified status) can be paid out of the trust . I would begin to worry about the paying the expenses out of the trust if the employer is also making design changes that aren't requred to maintain compliance with required law changes. Then you have an issue about having to apportion the expense or having the sponsor pay all of it as a settlor expense that isn't properly charged to participants.

[KJohnson]

I don't think DOL completely agrees with Alf's analysis. I pulled 97-03A and looked at it again. DOL specifcally addressed the issue of "expenses attendant to amending a plan to maintain its tax-qualified status" including seeking a determination letter. DOL stated that only "a portion" of the expenses related to such actions could be allocated to the plan because ensuring tax qualfication confers significant benefits on both the plan sponsor and plan participants.

DOL then looked at the potential prohibited transaction issue under 406(B)(1) and 406(B)(2) when "one party" attempts the allocation between the plan and the employer and came to the conclusion that an independent fiduciary could be required.

I don't think that DOL came to the right result, but that opinion is "out there".

[Kirk Maldonado]

For a number of technical reasons, most ERISA attorneys vastly prefer being paid by the employer rather than by the plan. Although not all of the same issues arise when the plan documentation is prepared by another service provider, it is generally better if the employer pays those fees.