Use of Excess Revenue to Pay Expenses

[khn]

A recordkeeper has just set up an excess revenue account for a client, but is including a one-time deposit that represents excess revenue from 2014 that was collected but not credited to the plan until now.

The client has already paid their 2014 invoices but would like to be reimbursed for 2014 fees they paid for qualified plan expenses (i.e, to auditor, accountant, etc.).

What are your thoughts, is this doable?

[QDROphile]

Become familiar with PTE 80-26.

[khn]

Thanks, i'm still a bit unclear though. They intention was never for this to be a 'loan'. In this case, this is 2014 revenue but the funds weren't credited until 2015. So i'm thinking this would not be considered a prohibited transaction, agreed?

[QDROphile]

If the intention was not that the employer would advance funds for payment of plan expenses and then be repaid (a loan), then what was the intention? If the employer was just going to pay the expenses, and now opportunistically decides to recoup, then I think it would be a prohibited transaction.

If the loan was intended, then it is a prohibited transaction (a loan), but it may be exempt under PTE 80-26 if the conditions are met. I imagine that one of the conditions is met: no interest charged.

Also be aware of the role of the fiduciary in all this. There may be a nice breach of fiduciary duty to reckon with.

[K2retire]

If the money wasn't deposited until 2015, why not use it for 2015 expenses that haven't been paid yet?

[khn]

They plan to, but the one-time deposit for 2014 revenue is much more than there projected expenses for the year. They're hesitant to allocate it to participants because this will most likely be the only time they'll receive it, and they don't want to set an expectation that they'll get it going forward. But it sounds like that's the safest route.