Forfeitures to pay plan expenses

[BG5150]

I have a client that has paid a few invoices in 2010 related to valid plan expenses out of company money. The plan has some money in the forfeiture account that can be used to pay for plan expenses.

Can the ER use that money to reimburse itself for the expenses? The money was in the forfeiture account at the time they wrote the checks.

[QNPG]

I have a client that has paid a few invoices in 2010 related to valid plan expenses out of company money. The plan has some money in the forfeiture account that can be used to pay for plan expenses.

Can the ER use that money to reimburse itself for the expenses? The money was in the forfeiture account at the time they wrote the checks.

BG, I read most of your posts...but who am I

[GBurns]

Lance

You should know, by now, that sometimes it is better to let people think that you might be a fool, than to disclose that you really are. He/She probably learned from your example.

[GMK]

BG - from what I've read on these boards, it seems unlikely that the plan can get the money under these circumstances.

Probably better for the company to make a reminder to itself that there's money available to pay future expenses when they arise.

(and it's a shame that anyone would spam a legit question posting.)

[Bird]

No, I don't think you can reimburse the employer for those expenses. No matter how you slice it, it's money going from the plan to the employer.

And fyi I exercised my right as moderator or whatever it is that I am called to delete the messages unrelated to this thread.

[12AX7]

The Basic Plan Document we have explicitly would prohibit payments going to the employer.

[BG5150]

Basically, someone paid our retainer back in December from company assets. In doing the 2010 analysis, I mentioned there's some forfeiture money. He wants to know if he can pay get paid back for that.

Also, we did an amendment in December which he paid for from the company.

Can that be reimbursed?

All the invocies we are talking about are int he 4th quarter 2010. And would be paid from the forfeiture balance a/o 12/31/10.

[MARYMM]

Basically, someone paid our retainer back in December from company assets. In doing the 2010 analysis, I mentioned there's some forfeiture money. He wants to know if he can pay get paid back for that.

Also, we did an amendment in December which he paid for from the company.

Can that be reimbursed?

All the invocies we are talking about are int he 4th quarter 2010. And would be paid from the forfeiture balance a/o 12/31/10.

Could those invoices be paid again from the forfeitures and then you could refund the original payment (from company assets) to the client

[12AX7]

Discretionary amendments should not be paid from the plan. Amendments to preserve qualification can be paid from the plan.

Nonetheless, what you are describing can not happen, at least in our plans. I take it your plan document is silent on the issue?

[BG5150]

The amendment was the Heart/WRERA, so it wasn't discretionary.

The doc says that forfs can be used to pay for plan expenses. I don't see where it says the money cannot revert to the Employer for expenses already paid.

The plan is the Corbel Volume Submitter.

[WDIK]

Is it possible that you reimburse the client and then have appropriate fees paid to you from the plan?

[Guest Dressageho]

Under IRC Section 4975(d)(10), assets of a Plan can be used to reimburse the employer sponsoring the retirement plan for properly and actually incurred expenses related to services rendered for the Plan without being classified as a prohibited transaction that is subject to penalties.

[12AX7]

Now I have a similar situation as BG, except that the plan is terminating. I don't see how 4975(d) (10) would allow for the reimbursement of expenses incurred by the employer. It seems this would allow for payment of expenses incurred by the disqualified person for services rendered to the plan. Is anyone reading this differently?

[TPApril]

Same topic, but different question:

Plan forfeitures can be used to pay fees. 2010 plan year fees are being invoiced. There have been amounts forfeited in 2011. Can these amounts be used as well as prior year amounts, to pay for the fees? Or maybe plan year of forfeiture and plan year of incurred expense really don't matter?

[Bird]

Plan forfeitures can be used to pay fees. 2010 plan year fees are being invoiced. There have been amounts forfeited in 2011. Can these amounts be used as well as prior year amounts, to pay for the fees?

I say yes.

[austin3515]

I have the same question now... I was intrigued by the reference to 4975(10) There do not appear to be any parameters, so perhaps we can apply the beloved "reasonableness standard." See below. I also found an article from Groom Law Group that said it was ok to reimburse the employer (subject to plan terms of course), but if it was outstanding for more than 60 days you needed an interest free loan document. They did not reference any sites.

(10) receipt by a disqualified person [i.e., the Plan Sponsor] of any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred, in the performance of his duties with the plan, but no person so serving who already receives full-time pay from an employer or an association of employers, whose employees are participants in the plan or from an employee organization whose members are participants in such plan shall receive compensation from such fund, except for reimbursement of expenses properly and actually incurred;

[QDROphile]

It sounds line the Groom article was dealng with employer's payment of the expenses being treateed as a loan to the plan (reimbursement being the repayment), which is a prohibited transaction. There is a PTE that covers the circumsntances. Any plan that regularly reimburses the employer for expenses should put arrangements in place to satisfy the conditions of PTE 80-26.

Edit added citatation.

[austin3515]

QDROPhile, you read my mind with your edit. I was just coming out here to ask for it