Administrative fees for distribution

[Guest Rick Butler]

I have come across an IRS opinion letter that suggests that administrative fees charged on participant distributions may not be permissable. Does anyone have any guidance on this matter?

[Alf]

What is the cite to the ruling you have a question about?

[Bill Berke]

Are you sure this was an IRS ruling/notice? It sounds like the DOL (and they issue Advisory Opinions). Please post the cite. The DOL says charges to plans are acceptable if they are for the adminstration of the plan or a bell and whistle for the employee (TPA fees, loan fees, trustee fees, even some legal fees). One CANNOT charge a fee for something that is for the benefit of the employer (e.g. plan termination fee) or for work that is statutorily required such as QDRO work.

[MoJo]

The DOL rule has broader implication, and includes distributions. I believe the rule indicates that while the "plan" may pay any reasonable fee associated with the operation of the plan, participant level fees can only be charged for those services not inherent in the provision of benefits to the participant. Hence, a plan really isn't a plan unless it distributes assets - so distributions can't be charged to the participant receiving the distribution.