Investment Courses as Plan (Trustee) Expense

[Dalai Pookah]

Small DB plan Trustee pays for investment courses from Trust assets (about $1,500 from $750,000 of assets).   Could this be construed as a plan expense?  I think probably not, however, in the context of a DB plan for which the Trustee is main participant and ultimately having to meet minimum funding it may not make a difference.

The ultimate question is whether this type of expense is proper to begin with or legitimately a settlor or personal (to the Trustee) expense.  In the context of a DC plan it could make a difference.

[jpod]

If it's considered a plan expense, I don't believe it's a "reasonable" expense.  You must satisfy both requirements.  Would it be reasonable to separately reimburse the plan actuary to take courses on how to value pension plan liabilities, or to reimburse your auditor on how to audit a pension plan?  Of course not, and I think this is analogous. 

[Luke Bailey]

I think this is a tough one. Depending on facts and circumstances, you can probably make a decent argument it's a plan expense.

[jpod]

Luke, do you disagree with my point about actuaries' and auditors' training being analogous?  Isn't expertise in the matter for which the service-provider is being retained something that should be expected and not something which the plan should have to subsidize?  If so, it is not a reasonable expense.  The fact that the trustee is (presumably) not being compensated shouldn't be relevant.  

[david rigby]

Is this "continuing education"?  Many professions have CE requirements.  IMHO, that expense belongs to the individual. 

Is the "Trustee" an employee of the Trust?  Not likely, so having such expense paid (or reimbursed) by the Trust is not a valid plan expense.

[Luke Bailey]

4 hours ago, jpod said:

Luke, do you disagree with my point about actuaries' and auditors' training being analogous?  Isn't expertise in the matter for which the service-provider is being retained something that should be expected and not something which the plan should have to subsidize?  If so, it is not a reasonable expense.  The fact that the trustee is (presumably) not being compensated shouldn't be relevant.  

jpod, my take on the question was that this was probably the business owner who is the trustee. In that context, he or she may feel he or she needs education. In theory, that is the equivalent (or cheaper) of having the trust hire an expert to advise him or her on whatever he or she is being educated about.

[jpod]

Fair point, and I made the same assumption.  Nevertheless it still is a concern to me and for that matter since it is a db plan it would seem to make overall sense from a tax perspective for the employer entity to paying those expenses, rather than the plan (unless it is clearly overfunded). 

[Dalai Pookah]

My underlying thought was that the Trustee, who is usually the owner, is charged with fiduciary responsibility and held to a "reasonable expert" rule.  Knowing there are no qualifications to become a Trustee, unlike other professionals, does investment course expenses rise to reasonable plan expenses.  

I believe (as demonstrated above), it is a close question.  But then, again, that's why airing it in this forum makes sense.