Skip to main content

A reimbursement roadmap for retirement plan sponsors




When retirement plan sponsors perform administrative services on behalf of the plan, they can be reimbursed by the plan for those services. However, meticulous attention to detail is essential to staying on a safe path with regulatory authorities. Here’s a brief roadmap to getting back some dollars for your hard work — and keeping them.

Satisfying ERISA

For a plan sponsor to receive reimbursement for services it has provided to the plan, the sponsor must satisfy regulations under the Employee Retirement Income Security Act (ERISA). This means that the transaction must, first, satisfy the standards for a “prohibited transactions” exemption. The basic ERISA-prohibited transaction that must be avoided is “self-dealing.”

In addition, the transaction needs to meet ERISA’s prudence standards for plan fiduciaries. Regulations allow a fiduciary like the plan sponsor to be reimbursed for “direct expenses properly and actually incurred in the performance of such services.” They also must be “reasonable.” Generally, courts decide reasonableness on a case-by-case basis.

Fiduciary standards are applicable to just about any substantive actions a plan sponsor can take with respect to a plan except “settlor” tasks, such as changing the level of employer contributions to participant accounts, amending the plan document or terminating the plan.

Documenting expenses

When disputes arise, fiduciary standards are further defined by the courts. For example, in Perez v. City National Corporation, the U.S. Department of Labor argued — and a court agreed — that City National’s reimbursement for services rendered to its ERISA plan didn’t provide sufficient documentation. Its calculation of “direct expenses” was based on averages and estimates.

That methodology, the court concluded, could have resulted in over- or undercharges to the plan. Instead, the court ruled, the company should have “kept contemporaneous time records [such as timesheets] so that it could calculate actual costs” of its administrative services to the plan.

Being mindful

If you intend to seek reimbursement from the retirement plan that your organization sponsors, be mindful of the journey ahead. To avoid discrepancies and meet your fiduciary burden, thoroughly and properly document any expenses incurred, and assess the reasonableness of any fees you charge to the plan. Our firm can offer further information and assistance.

Please contact us for additional information

© 2018


Popular posts from this blog

IRS Announces Employer Provided Parking is Now Taxable

On December 10, 2018 the IRS released an advance version of Notice 2018-99 as interim guidance for taxpayers to use in determining the amount of parking expenses for qualified transportation fringe (QTF) benefits for tax-exempt organizations to determine the amount of unrelated business income tax (UBIT) attributable to parking expenses.
IRS Tax Notice 2018-99 release


Please contact us for additional information

Offering COBRA to a terminated employee’s domestic partner

Many employers offer coverage to employees’ domestic partners under their health care plans. If your organization does so, you need to determine what rights domestic partners have regarding COBRA insurance.

General principles

One common question for employers is whether terminated employees may elect to continue COBRA coverage for their domestic partners. The answer is yes; a terminated employee who elects to continue health plan coverage under COBRA may also elect coverage for a domestic partner who was covered under the plan immediately before the employee’s termination.

The domestic partner’s COBRA coverage depends on the employee’s coverage. In other words, the domestic partner will be covered until the employee’s COBRA coverage ends, whether due to failure to pay required premiums or because the coverage period has ended.

This is based on the general principle that COBRA coverage must ordinarily be the same coverage that the qualified beneficiary (in this case, the terminated em…