Investment Expense Reimbursible?

[imchipbrown]

I have a client that is switching investment vehicles. Previously, he had a pooled account with six or eight mutual funds, mostly no-load.

Because of the time needed to administer the plan, they're switching to an insurance company product for investments, statements, etc.

The Trustee's only concern is that the employees will be absorbing an "invisible" charge at the switch. Basically, their account balances get invested in mutual funds at a slighly inflated share price.

Anyway, the Employer is amenable to making up roughly half the hidden charge. It'll be about $10,000, so the employer wants to allocate $5,000 on an account balance basis.

I've seen some cases where IRS has allowed additional contributions to true-up a fiduciary breech and the like. Is this do-able?

I'm fairly sure that highly comp'ed employees have larger account balances, but also may be smaller in proportion to pay.

[Jon Chambers]

I've worked with some insurance companies that are willing to bill the incremental wrap fee. This permits participants to get the funds at true NAV. Perhaps your insurance company would be willing to bill half the fee, acheiving the objective without requiring an extra allocation. Worth asking anyway.

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Jon C. Chambers

Principal

Schultz Collins Lawson Chambers, Inc.

(415) 291-3004