Answer: Yes, but not all expenses. (And you thought this was going to be an easy answer? Well, don’t worry, we will make it easy for you).

Think of it this way: If a specific service is required in order to keep your plan in full compliance, the expenses for that service can be paid from the plan. For example, TPA fee for performing annual non-discrimination testing and government filings, such as Form 5500, can be paid using plan asset. Another is annual CPA audit expenses if your plan is a large filer (generally, plans with 100 or more participants). You don’t have to memorize this as we provide a whole list of fees that can or cannot be paid below – so you can come back here when you need to or print this page as a reference.

Settlor vs. Non-Settlor Expenses

The Department of Labor has indicated that “settlor” which are business expenses related to a retirement plan (and are not expenses for the administration of the plan), cannot be paid by the plan. Only reasonable administration expenses can be paid by the plan. In other words, “settlor” expenses can be paid using plan asset, but not “non-settlor” fees.

Fees That Can Be Paid Using Plan Asset (Non-Settlor Expenses)

• Fee to amend the plan to reflect law changes affecting the plan document
• Annual valuation of trust assets
• Independent appraisal of hard-to-value assets held by plan
• Service provider fees (recordkeeper fees, reporting fees, accounting fees, disclosure expenses such as preparation of the SPDs, benefit statements, fee disclosure to participants, etc.)
• Expenses for monitoring and evaluation for appointed fiduciaries
• Investment education materials for plan participants
• Fees for investment advice services
• Premiums for ERISA fidelity bond
• IRS determination on the plan termination

Fees That Cannot Be Paid Using Plan Asset (Settlor Expenses)

• Fee for plan design proposals
• Legal fees regarding corporate issues relating to the establishment of the plan
• Fee for discretionary amendment (for example, changing the eligibility, allocation formula, vesting, permitting loans, etc.)
• Penalty fee for late Form 5500 filing under DOL’s DFVCP program
• Fees incurred in making a decision to terminate the plan

Final Words

Even if a fee is non-settlor expense and therefore can be paid from the plan, the amount cannot be unreasonable. It is a critical fiduciary decision for employers to determine what is reasonable, so be sure to consult with your retirement plan expert beforehand.

If you’re unsure about what fees you can or cannot charge to your plan, send us an e-mail or give us a ring. While we cannot make the final determination for you, we are happy to talk through the particulars with you to help you arrive at an appropriate decision.