Investment Advisory Fees

[bzorc]

A Plan Sponsor has a Profit Sharing Plan (3 participants) with pooled investments held at a brokerage firm, which charges quarterly investment advisory fees. Plan Sponsor wishes to reimburse the Plan each quarter for the fees paid. I haven't seen this in years, but I believe there are two options:

Treat the reimbursement as an employer contribution (Deductible on the corporate tax return); or

Treat the reimbursement as an expense of the Employer, deductible on the corporate tax return.

Any thoughts would be appreciated, thanks.

[Bird]

51 minutes ago, bzorc said:

Treat the reimbursement as an employer contribution (Deductible on the corporate tax return)

Yes

51 minutes ago, bzorc said:

Treat the reimbursement as an expense of the Employer, deductible on the corporate tax return

No.  They could pay fees directly and deduct them but can't reimburse as such.  Many threads on this.

[bzorc]

Thank you! In the past I've always told the Sponsor that it's considered an employer contribution, allocated to eligible participants. 

[Luke Bailey]

Bird, as I think bzorc is suggesting, if you treat it as a contribution, don't you have to allocate it based on comp, subject to 401(a)(4) and in accordance with plan provisions. If you treat it as a contribution and don't do that, you're allocating it based on account size, right?

[Larry Starr]

7 hours ago, bzorc said:

A Plan Sponsor has a Profit Sharing Plan (3 participants) with pooled investments held at a brokerage firm, which charges quarterly investment advisory fees. Plan Sponsor wishes to reimburse the Plan each quarter for the fees paid. I haven't seen this in years, but I believe there are two options:

Treat the reimbursement as an employer contribution (Deductible on the corporate tax return); or

Treat the reimbursement as an expense of the Employer, deductible on the corporate tax return.

Any thoughts would be appreciated, thanks.

They need to pay the expenses directly from the plan sponsor to the brokerage firm.  Can't handle it as a reimbursement.  Simple.

[Bird]

16 hours ago, Luke Bailey said:

Bird, as I think bzorc is suggesting, if you treat it as a contribution, don't you have to allocate it based on comp, subject to 401(a)(4) and in accordance with plan provisions

of course

16 hours ago, Luke Bailey said:

If you treat it as a contribution and don't do that, you're allocating it based on account size, right?

no because you can't do that