Internal Plan Expenses

[Guest gpr]

Our company is considering bringing the plan administration (recordkeeping, etc.) of its 401(k) in-house, and wants to try to find a way to charge the plan for expenses incurred. Realizing that we cannot charge what we would charge clients for this service (as that would include a profit to the company), and that we cannot directly charge salaries (we won't allocate a full-time head to the task), what CAN we charge? Has anyone else run into this with their own plan? If so, what was your decision, and did you get DOL guidance?

[davef]

The Department of Labor has issued a number of Advisory Opinions which have addressed the reimbursement of internal company expenses where these in-house services related to plan administration. It is important to note that in each advisory opinion the DOL has declined to rule as to whether a service is necessary, a contract or arrangment is reasonable, or compensation is reasonable, because these questions are inherently factual.

You may want to look at Advis. Ops. 83-20A, 86-001A, 89-09A and 83-020A. They give you a good idea of how other employers are justifying and documenting the costs charged for the in-house services.