Payment of Plan Expenses

[Guest Maddog]

A proposal is on the table at our company, which essentially would work as follows:

For administrative convenience, the company would pay ALL expenses relating to our 401(k) plan, pension plan, and ESOP from the general assets of the company as these expenses became due. Shortly thereafter, the plan administrator would determine which of these expenses were properly allocable to the various plans. Subsequently, each plan would be required to reimburse the company for its respective expenses.

Assuming we overcame the fiduciary hurdle of determining which expenses are properly payable by the plan, does this proposal run afoul of the prohibited transaction rules?

[LCARUSI]

m thom has posted a similar issue on this board. You should check out the repsonses there as well as in your thread.

[Guest bswift]

generally, its not such a great idea to reimburse expenses to the employer that may be properly allocated to the plan itself. However, having said that, there are some expenses that are strictly plan sponsor expenses and cannot be paid from the trust. When you said ALL expenses, I assume that you meant those expenses that are properly allocated to the trust, and not the employer. In any event, its not a good idea.

[Guest JPCMPLS]

You may want to take a look at DOL Prohibited Transaction Class exemption 80-26 which allows interest free loans (advances) by plan sponsors to or on behalf of a plan for the payment of ordinary operating expenses.

[Guest gpr]

I've been told by two ERISA attorneys that the prohibited transaction exemption only applies to benefit payments, and that reimbursement to the employer of fees is not included. Could be that someone with a more liberal view will tell you differently, though.