Paying Certain Plan Expenses from Individual Account Plans

[Guest ANNEBV]

Can anyone expand on the rules for paying plan expenses (specifically, plan administration-related expenses) from a plan that utilizes individual accounts for all participants?

My client wants to begin charging the plan (the affected participant's account) for the fees associated with processing distributions, withdrawals & loans. (The plan document does have "broad" language that allows the trustee to pay appropriate expenses from the plan or by the Employer, so there's not a plan document issue.)

I am curious about various other threads that have mentioned a DOL Opinion Letter that apparently references a distinction between plans with pooled assets versus plans with individual participant accounts (at the trust level). Is there an issue with plans with individual accounts?

Any help would be greatly appreciated!

[alanm]

Individual accounts are ok to charge for participant directed events as long as they are not charged for mandated rights under ERISA. For example, ERISA does not mandate the plan have loans or hardships, it is an extra benefit. However, a pure distribution is a mandated right of a terminated pariticpant and the charge should be assessed against the trust in general not against the participants individual account. But, 404c, self directed, individual accounts are not a mandated ERISA right and an individual charge could be assessed for such things as doing a trade, final accounting, closing such an account. Therefore, in that case, I would word the fee: "404c account closing fee" and not call it a charge for distribution.

[Bill Berke]

It would behoove you to read the DOL pronouncements (opinions and letters) about which plan related charges must be paid by the sponsor or the plan and which can be allocated to the particpant. Generally, those expenses required by law, such as QDRO preparation and processing, cannot be charged to a particpant. The DOL distinguishes charges between "settlor" (sponsor) functons, plan functions and voluntary benefits. Voluntary benefit expenses (those expenses not reguired by law), such as costs for loans or directed accounts, can be charged to the participant. If there is a question, it is always safer to not charge a participant. And the plan documents must permit these charges to be paid by the plan or charged to the participant.