Broker Fees

[Zoey]

I have a new client who asked me a strange question.

He asked his broker if the broker's fees could be paid outside of the plan and the broker told him no. He now wants to know if he can "put the money back into the plan" to cover the brokers fees (i.e., make the accounts "whole"). This wouldn't be a contribution obviously, but I've never had a client want to do this, or if it can be done. Has anyone had this question, or know the answer?

Thank you so much!

[Lou S.]

I have a new client who asked me a strange question.

He asked his broker if the broker's fees could be paid outside of the plan and the broker told him no. He now wants to know if he can "put the money back into the plan" to cover the brokers fees (i.e., make the accounts "whole"). This wouldn't be a contribution obviously, but I've never had a client want to do this, or if it can be done. Has anyone had this question, or know the answer?

Thank you so much!

That's not what the IRS says.

[Guest Eric A]

If the plan document permits it, then I'd say it can be done. However, I disagree with you that the reimbursement wouldn't be a contribution. I don't have any citations off hand, but the reimbursement of plan expenses by an employer is a contribution for 404, 415, 401(a)(4), etc... purposes.

[QDROphile]

The IRS has ruled that a commission is essentially part of the stock price, so it cannot be paid outside of the plan. Investment management fees are different, but you have to watch the detials of how the fee works to see if commissions can be identified. If amounts are added to the plan to cover the commision amounts paid by the plan, the additions would be contributions. I am amazed at stories of brokers who provide correct information about plan administration technical details.

[Zoey]

Thank you so much for all of your responses! I learn something new every day. I've never had to deal with brokers fees, as they have always came from the plan, and now I know why.