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Posted

I was asked the following (this is out of my realm):

Partner A in Plan Origin terminated and had assets that required some attorney's involvement for liquidation (do not know the details) and Plan Origin is located in State A.

Now ex-Partner A moves to State B and starts a PS plan - Plan Destination.

While in Plan Origin, with the help of the attorney, ex-Partner A was able to liquidate the assets within Plan Origin (1M dollars) and the attorney's fee was 20k i.e. 2% of the assets.

Once all settled with Plan Origin, 1M dollars were rolled over to Plan Destination.

This ex-Partner A now wants to pay the attorney's fees from the assets which are now in Plan Destination.

Can he do that and if yes, is there a cite for it?

My comment would be, no, as all events took place within Plan Origin and once rolled over to Plan Destination, it is no longer a Plan Destination related expense.

Curious what others have to say.

Thank you

Posted

Are you sure there was a distribution from Plan Origin, followed by a rollover contribution into Plan Destination?

Or might there have been a plan-to-plan transfer of assets and obligations?

Also, Plan Destination’s administrator and trustee might evaluate whether the attorney had (and perhaps still might have) a charging lien regarding some claim the attorney might have helped perfect.

The plan fiduciary should get its advice from a lawyer who is (i) independent of the to-be-paid attorney, and (ii) competent to spot and evaluate the many exclusive-benefit, prohibited-transaction, and other ERISA title I (if it governs either plan) and Internal Revenue Code issues.

This is no advice to anyone. I mention it only as a possible variation, in some circumstances, against the general principle that an employee-benefit plan doesn’t pay another plan’s expenses.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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