MEP - How to bill fair fees

[The 402"(G)"]

We started up an Open MEP recently and question the best way to collect fee's on it.

Before it was a MEP, the fee's had been paid out of plan assets. We had a base fee and then a per participant fee. A total fee was calculated and then taken based on account balance.

Not that it is split, we are now not 100% sure if there are certain fee structures that can't be used. Let's say we have the following company fee structure.

For simplicity, a $25 per participant fee.

20 people in company A and 80 in company B. - Total fee is then $2,500.

However, Company A has 50% of the assets and Company B has 50% of the assets.

Now it's created a situation where even though Company B has created $2,000 of the fee's, it only has to pay for 1,250 of it.

Does anyone have past experience with this or know if there is some sort of regulation on how we can charge the fee's then for this case? The company would not want to start paying the fee's - they like to have as much paid by the plan as possible.

 

[Bird]

I'm having a hard time reading this because there seems to be some kind of ownership attributed to "the fee" but I think I get it.

Arguments can be made either way but I'd vote for any per participant fees to be paid exactly that way, per participant.  A base fee could be done pro rata on assets or per capita on participants; I'd vote for pro rata.

(Arguably, your old method of calculating a total fee and allocating on assets was not fair to those with more assets.)

[hr for me]

I'd ask what the plans were expecting? what was communicated at the time of setup?

I do agree with Bird that I would tend to go with the per participant fee and then pro-rate any base fee based on balances overall. But can your system do both?

[Gadgetfreak]

The issue with a per-participant fee being assessed for each participant is that someone with a $100 balance will have a proportionally greater fee than someone with $1,000 or $10,000. But I don't like the first method either. How do you explain to each participant that their fee for this period was $36.27 because you added up all the $25 across all participants and then allocated pro-rata? Next bill will be $28.65, etc. If the participant asks for you to "prove" that their fee was accurate, what do you do? You can show them all the other balances.

In my opinion, if you can't assess the exact fee for each participant (which has the challenge I mentioned above), I think it is best for the Sponsor to pay the fee.

I know I went off topic because my comments relate to even the first way you were handling this - nothing to do with the MEP. But, after running a RK Helpdesk, I have seen first-hand how participants demand clear fees.

[RatherBeGolfing]

Maybe I'm missing something, but since the plan is paying the expenses, shouldn't the fee (or the formula for calculating the fee) have been disclosed ahead of time?  Or are we discussing future changes?

 

[CuseFan]

if the fee is $25/per then it should come out of plan assets/accounts that way. if this is a TPA fee and not recordkeeping, you're doing the same work for someone with a $1000 account as with a $50000 account, at least when it comes to including in testing, do a statement (if applicable). if that is not how the fee is determined, but how it "shakes out", then you need to really drill down into how it's determined or apportioned, what is a fixed base, what is a per participant service, and what, if anything is asset-based. maybe look at how you would charge each plan if it was separate and use that ratio to split fees.