Settlor Function?

Is the cost of conversion from one investment platform/recordkeeper to another considered a settlor expense?  I think not, but want to confirm since it is a Trustee discretionary decision to move the plan's assets.

Well, "it depends."  I would argue that moving to a new service provider - being that that decision was a fiduciary one (or it better be) is an expense that could be borne by the plan - BUT it would depend on the costs your are talking about.  In my experience there are no "hard dollar" costs that the plan or the sponsor would incur.  There is labor involved, but would never (ever ever!) recommend that a plan sponsor try to recoup that expense from the plan - so it becomes a plan sponsor borne expenses.  Investment related expenses (back end loads, market value adjustments, termination fees) are all complex subjects and would require an in-depth analysis to determine if it is, or could be a settlor expense (without it being a contribution to the plan).

What kind of expenses are you talking about?

Just a guess, but wouldn't an action taken by the trustees generally never be considered a settlor function?  Settlor functions are actions taken for the benefit of the sponsor.

In this case, the Trustees are the owners of the company and are the plan sponsor.  Same  same.

MoJo - The expense is a deconversion fee that Newport Group charges when a plan leaves to go to another investment platform.  I don't know the amount because it is not referenced in their deconversion form (typical).  Their deconversion form allows the plan sponsor to choose to pay with forfeitures and I want to be sure that this is acceptable.

28 minutes ago, 401(k)athryn said:

In this case, the Trustees are the owners of the company and are the plan sponsor.  Same  same.

 

MoJo - The expense is a deconversion fee that Newport Group charges when a plan leaves to go to another investment platform.  I don't know the amount because it is not referenced in their deconversion form (typical).  Their deconversion form allows the plan sponsor to choose to pay with forfeitures and I want to be sure that this is acceptable.

Please bear in mind that I am not an investment expert, a lawyer or an expert on fiduciary rules, but...

When making decisions as trustees, the owners of the company are acting as trustees of the pension fund and NOT as owners of the company.  As unrealistic as that statement may be, it is a fact that if, while taking steps that fall within the authority of the trustees, the trustees place their personal interests or the interests of the sponsoring organization ahead of those of the plan and its participants, they are committing a breach of their fiduciary duties.

Deciding to move the assets from one investment firm to another falls squarely within the duties of the trustees acting as trustees.  As such, it is not driven by the sponsor and would not be a settlor function.

My 2 cents - THANK YOU!

I very much doubt that the plan documents delegate to the trustees of the plan's funding vehicle, the trust, with the authority to hire and fire other plan service providers.  That is either a plan administrator function or a plan sponsor function.  Nevertheless I agree with the ultimate conclusion that while in general any out-of-pocket costs associated with that should be legitimate plan administration expenses, the devil will be in the details when it comes to certain costs.

Trustee or administrator, selecting service providers is not an employer function.  Analysis of the continued suitability of the current service providers/advisors or their replacement is a responsibility of the administrator or the trustee.  The key thing to remember here is that even if the people who are trustees and the people who are the administrator are the same people who own the sponsor, when they act as trustee or administrator they must put the interests of the owners aside to the extent necessary to fully discharge their fiduciary duties.

When and how to amend the plan (other than merely to maintain compliance) is a settlor function, but carrying out the sponsor's decision is a fiduciary matter, and the latter is the sort of thing for which the plan may bear the expenses.

3 minutes ago, My 2 cents said:

Trustee or administrator, selecting service providers is not an employer function.  Analysis of the continued suitability of the current service providers/advisors or their replacement is a responsibility of the administrator or the trustee.  The key thing to remember here is that even if the people who are trustees and the people who are the administrator are the same people who own the sponsor, when they act as trustee or administrator they must put the interests of the owners aside to the extent necessary to fully discharge their fiduciary duties.

When and how to amend the plan (other than merely to maintain compliance) is a settlor function, but carrying out the sponsor's decision is a fiduciary matter, and the latter is the sort of thing for which the plan may bear the expenses.

What he said.

In other words - the plan sponsor designs the plan, the fiduciaries carry out that design (as a prudent expert would) and that includes finding appropriate service providers who will do quality work (as a prudent expert would demand) for a reasonable price (as a prudent expert AND the DOL demand).

The "price" paid (as long as it's reasonable) is a plan expense, but the employer can usually cover those costs outside of the plan if they want to.