Correction for Overcharging

[Madison71]

Good Morning -

I am wondering what the correction is for a 401(k) plan that is inadvertently set-up with a 20 basis point annual asset charge for TPA fees paid out of the Plan when it should have been only 10 basis points.  The error occurred over one year ago and was recently discovered by the TPA firm.  Some of the participants who were overcharged were paid out of the plan already.  My initial thought is to self-correct by reimbursing the participant accounts on a nondiscriminatory basis plus missed earnings.  I appreciate the insights.  

[Mike Preston]

I know this sounds discriminatory, but I think it works.  For those paid out folks whose underlying multiplier is less than $X, they get nothing.  Everybody else gets what's left.  If there is a 10 basis point error then $X  will probably fall between $75,000 and $100,000. FWIW

[Madison71]

Thanks Mike!

[Kevin C]

I would also suggest looking at the 408(b)(2) regs to see if your situation still meets the requirements for the TPA contract to be considered reasonable.