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Time to Cut Costs? Consider Paying Expenses from the Retirement Plan Trust

In these tough economic times, employers want to cut any costs they can.  The HR department can help by considering whether retirement plan costs traditionally paid by the company such as consulting and professional fees, can instead be paid from retirement plan funds.  Thankfully the rules governing use of retirement plan funds to pay plan expenses are relatively simple.

The general rule is that costs of administering the plan and communicating with participants may be paid by the retirement plan.  Costs of plan design must be paid by the company.  It is a prohibited transaction for the retirement plan to pay an expense that should have been borne by the company, such as a plan design change study.  Examples of expenses that may be paid by the plan include audit fees, fees for preparing communication materials such as summary plan descriptions, and fees for legal advice regarding plan operation.  Examples of fees that may not be paid from the retirement plan include fees paid for a study to redesign retirement plan benefits or fees to consider plan options in implementing a new law change. 

It is best for companies to inform their service providers in advance that the company would like for the retirement plan to pay expenses.  This allows the service providers to separately track expenses that are not eligible to be paid from the retirement plan.  Additionally, prior to paying any expenses from the plan trust, companies should check with their benefits advisors to verify that the expenses may be paid by the plan trust.  It is also necessary to review the plan’s language to verify that payment of the expenses will not violate the plan’s terms.  Finally, companies should check with their recordkeepers to determine the recordkeeper’s ability to account for expenses paid from the plan.   

© 2019 Poyner Spruill LLP. All rights reserved.

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About this Author

David L. Woodard, Employment Litigation Attorney, Poyner Spruill, Law firm
Partner

David practices in the area of employment litigation.  He regularly advises and defends clients in race, age, disability and sex discrimination and harassment cases; reviews handbooks and termination issues; and provides compliance advice on matters of employment law.

Representative Experience

McNeil v. Scotland County - Obtained summary judgment for employer where plaintiff alleged race discrimination and retaliation in violation of Title VII of the Civil Rights Act as well as violation of the Americans...

919-783-2854
Nancy C. Brower, Employee benefits lawyer, ERISA Attorney, Poyner Spruill Law Firm
Partner

Nancy practices in the area of employee benefits and ERISA. She has significant experience designing and documenting retirement plans and executive compensation plans as well as providing administrative advice on these plans. Nancy has represented clients before the Internal Revenue Service and Department of Labor, and she has represented clients in matters involving employee benefit due diligence, negotiation and planning in the context of mergers and acquisitions.

Representative Experience

    • Designed and documented retirement plans
    • Provided administrative advice on retirement plans
    • Represented clients before Internal Revenue Service and Department of Labor
    • Designed and documented executive compensation plans
    • Provided administrative advice on welfare plans
    • Assisted on employee benefit due diligence, negotiation, and planning in the context of mergers and acquisitions
704-342-5275