Deducting Fees from 401ks related to financial plans

[Guest EricWings]

We are starting to sell financial planning services to our 401k participants for a monthly charge. I'm trying to figure out if it would be a good and safe idea to deduct from participant accounts.

Any thoughts would be helpful.

[Peter Gulia]

Many of the people who most need advice lack a way to pay a fee other than out of a retirement plan account.

There are some Internal Revenue Service letter rulings that shed some light on right and wrong ways, at least for income-tax purposes, of taking a participant-advice fee out of plan assets. Because none of these rulings is precedent and all are fact-specific, a service provider might want a ruling that ties to its standard form of written agreement and other facts. In my experience, it has not been difficult to obtain these rulings.