Terminated Participant Fee

[jeff77]

We are a TPA and have been asked by one of our Plans to gather information/ideas on the possibility of the Plan charging a "terminated participant fee". Basically this would just be a fee to a participant's account for being terminated in the plan with an account balance.

Does anyone out there have this? If so how did you determine the number? Any other comments would be helpful.

[ESOP Guy]

I am not very good at the search function but this has been covered before in detail.

I have seen plans that charge the terminated people their share of the fees to run the plan and the employer pay the fees for the actives.

I don't think you can charge the terms a fee that isn't related to the actual expenses for merely being terminated.

You are going to want to think about getting a lawyer involved to make sure you get it all right.

I know this needs to be disclosed in the SPD and made clear on distribution forms that if they don't take a distribution they can be charged fees.

There are other things to think of . Like I said I didn't find the prior threads on this but I know they are on this boards with good amount of details.

[QDROphile]

I would be wary about describing the fee that way. There can be no penalty for maintaining an account under the plan after termination of employment. To the extent that the employer covers a cost that can properly be paid by the plan and allocated to accounts on some basis, the employer can cover the cost for employees and not for former employees, effectively levying a charge on accounts of former employees. See Rev. Rul. 2004-10 (I think).