VCP Fees

[luissaha]

I have a multiemployer defined contribution plan that will likely make a submission under VCP. My question is regarding payment of the fee. Of course, the fee is paid by the Plan Sponsor, but in the case of a multiemployer plan, I'm not sure exactly how this should be handled. Should the sponsoring labor organization and the participating employers pay the fee? Can plan assets be used for a multiemployer plan? Any insight would be appreciated.

[Guest Sieve]

Who is the administrator? That's who should pay the fee. In this case, it's probably a joint committee of union & management reps. Same for professional fees.

What are the errors? If they are errors relating to individual employers over which they had repsonsibility--such as failure to make the proper contribution timely--then they should be asked to chip in for a portion of the fee. If the error was an administrative msitoake over which the fund had repsonswibility--like missing an MRD or paying out out too much as part of a distribution--then the emplohers ought not be expected to chip in.

But, plan assets are not available to pay the IRS fee or any professional fees which are part of the VCP application (that would not have been incurred but for the error & VCP aplication).

[luissaha]

The errors in this case are serious. The plan was purported to be a money purchase plan where the employers made a "basic" contribution of 3% of salary for eligible employees. However, employees were apparently allowed to defer additional money into the plan based on their years of service. For example, if you had 5 years of service, you could defer an additional amount into the plan, if you had 10 years you could defer an increased amount, etc. The deferrals were not mandatory, employees could opt-in or out of deferring the additional amounts. As deferrals are not allowed in post-ERISA money purchase plans (which this plan is), we advised that the deferrals had to stop.

The plan was set up years ago by the sponsoring labor union and they got bad advice on the plan design. It does not appear the employers were involved in the design, but they went along with it. I'm thinking they (the union and all employers) should all probably share in the costs with attemting to fix this.