2009 Enrolled Actuaries Meeting

Looking a copy of the EBSA Q&A 15 from the 2009 Enrolled Actuaries Meeting (deals with payment of plan expenses).

Thanks in advance.

Here it is.

Quote

QUESTION 15
Fiduciary Issues: Expenses Payable from the Trust
May plan assets be used to pay for any of the following actuarial tasks?
a) Forecast of future years’ minimum required contributions for purposes of plan sponsor budgeting.
b) Determining the effect of yield curve/asset method choices as an aid in selecting whether to use the full yield curve or the segmented rates, and whether to use market value of assets or a smoothed asset method.
c) Forecast of pension expense (for plan sponsor’s balance sheet reporting).
d) Asset Liability Modeling (ALM) studies to determine asset allocations that will best match investment objectives.
EBSA STAFF RESPONSE
As a general matter, we note that the Department has long taken the position that there is a class of discretionary activities which relate to the formation, rather than the management and administration, of plans, explaining that these so-called settlor functions include decisions relating to the establishment, design and termination of plans and generally are not fiduciary activities governed by ERISA. Expenses incurred in connection with the performance of settlor functions would not be reasonable expenses of a plan as they would be incurred for the benefit of the employer and would involve services for which an employer could reasonably be expected to bear the cost in the normal course of its business operations. However, reasonable expenses
incurred in connection with the implementation of a settlor decision would generally be payable by the plan. In this connection, see Advisory Opinion 2001-01, http://www.dol.gov/ebsa/regs/aos/ao2001-01a.html, and the Guidance on Settlor vs. Plan Expenses, ttp://www.dol.gov/ebsa/regs/AOs/settlor_guidance.html. Specifically, in relation to these questions, hypothetical fact pattern #2 explains that plan design expenses incurred in advance of the adoption of the plan or a plan amendment or for cost projections to determine financial impact of the plan change on the sponsor are settlor expenses and may not be paid by the plan.
a) No. Calculation of the contribution required by the plan sponsor does not relate to the administration or management of the plan or its assets and thus is not a reasonable administrative expense of the plan.
b) No, to the extent that the question involves calculations to establish the plan sponsor’s minimum funding obligations. Expenses involved in those calculations are plan sponsor settlor expenses that do not relate to the administration or management of the plan.
c) No. Calculations performed for the plan sponsor’s financial statement are not related to the administration or management of the plan.
d) Yes. To the extent that the ALM studies are done to assist the plan’s investment fiduciary in selecting asset allocations for plan investments, such expenses relate to the management of the plan’s assets and, when reasonable for the services provided, may be paid for from plan assets.
See Advisory Opinion 2006-08A (Oct. 3, 2006).