12(b)-1 fee Reimbursement

[Guest Laura Millwood]

Situation: Fee agreement with client says fees will be reduced by 12(B)-1 fees received, then once fees are reduced to zero, any excess will be remitted to the plan. How can a Third Party Administrator remit these monies to the plan? If possible, how is it treated? Will the money have to be actually paid to the plan sponsor, then the plan sponsor pay the money to the plan? I understand this will cause the money to be treated as a plan contribution and subject to aggregate nondeductible limits and individual limits on allocations. Thanks for any imput.

[Guest halka]

The Frost and similar rulings speak of "depositing (excess fees) to the Plan." I believe any such "refunds" to the Plan would simply be additional Plan earnings, not a contribution.

[Guest TYounkin]

You mean by having employees pay 12b(1) fees in their mutual funds this lowers the costs to the employer for having a 401(k) plan administered? If so, I'll say "ouch" on behalf of any employees paying such loads on any funds. Any fee as a percentage of assets each year really adds up in loss retirement savings to employees in years to come.

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