Correcting Excess Investment Advisor Fees Charged to Participant Accounts

A 401(k) plan recently changed investment advisors, resulting in lower investment advisory fees. However, due to an administrative error, the plan's recordkeeper continued deducting the prior (higher) investment advisory fee from participant accounts for approximately three months after the transition. The recordkeeper has indicated that it was unaware of the fee change when processing the deductions.

What is the appropriate method for correcting this error? Specifically, should the recordkeeper (or another party) restore the excess fees to affected participant accounts, and are there any ERISA or other compliance considerations that should be taken into account when making the correction?

From context in your query, I'm guessing the investment adviser did not accept, or has restored to the plan trust, the mistaken amount.

Consider crediting to each participant's, beneficiary's, and alternate payee's individual account the amount the account was incorrectly charged, with reasonable interest (or, if greater, the investment adviser's gain allocable to having had the use of the mistaken amount).

After all corrections are complete, the plan's administrator should evaluate its procedures and controls, particularly about how the administrator did not instruct the recordkeeper about the change in investment-adviser fees. After discerning the weakness, the administrator might tighten the procedures and document that change. (But the administrator should not write a procedure it won't follow.)

This is not advice to anyone.