Incorrect Management Fees Charged

[Vlad401k]

Let's say the participants in a plan are charged (by mistake) 1% annual management fee whereas they should actually have been charged 0.50%. In this case, can the plan sponsor reimburse the participants for the years they were charged extra? Is this considered an allowed correction procedure?

[Peter Gulia]

Has the responsible plan fiduciary exhausted its efforts to get from the overpaid service provider the excess the service provider was not entitled to?

[QDROphile]

Rev. Rul. 2002-45

[david rigby]

http://www.irs.gov/pub/irs-drop/rr-02-45.pdf

[ESOP Guy]

I am with Peter on this one. Has a request been made that the people who over charged pay the people back?

Not sure the fiduciaries can escape problems by throwing money at the plan.

[Peter Gulia]

Thank you for the vote of confidence. But I didn't express any view; rather, I asked a question to help uncover more of the hypothetical facts.

One might wonder why an employer is willing to pay if restoration should be had from a service provider that received amounts the service provider was not entitled to.

And understanding those reasons (which might be proper and loyal to the plan) might help in an analysis of whether an employer's payment is a "restorative payment" described in the tax-law interpretation.

[Kevin C]

What fee level did the service provider list in their 408(b)(2) disclosure? If they disclosed .5% and received 1%, that would affect whether their services were provided under a reasonable contract. That can impact the PT exemption for all of their fees. Depending on the situation, the fiduciary may need to seek the recovery of more than just the overpaid amount.