transfer fees for platform change

pmacduff · December 15, 2023

Client moves plan from national 401(k) vendor #1 to national 401(k) vendor #2.

Vendor #1 has a fee they charge when the plan leaves and Vendor #2 reimburses a portion of that fee and puts the $$ in the plan unallocated cash account directing the client that it can be used for reducing employer contributions or to pay fees.

If the client paid the initial fee to vendor #1, can the client reimburse the company for the portion that vendor #2 put in the cash account?

Peter Gulia · December 15, 2023

Does the plan’s governing document command, permit, or at least not preclude paying (and reimbursing) plan-administration expenses from the plan’s assets?

If so, was the exit fee a proper and prudent plan-administration expense?

CuseFan · December 15, 2023

On what basis was vendor #2's deposit into the plan? They weren't reimbursing the plan for an expense it paid, partially or in total, because it was the employer that paid the expense.

If the expense was paid by the plan and charged against accounts and then partially reimbursed, would that not have to be allocated back to participants? If the employer was reimbursing the plan for expenses the plan paid, and deducting as plan related administrative expenses then I think they would have to do that - they couldn't treat as contributions.

Far be it from me to question a national vendor, but I didn't think that any plan-related party could just toss money into a plan and have it be used for whatever.

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