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

CARES and Families First Payroll Protection Acts - information for Benefit Funds and Labor Unions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Families First Coronavirus Response Act both provide potential relief for nonprofit associations.
We are still awaiting important details on the many provisions of the Acts, but we wanted to provide a summary of some of the programs which will be of interest to our clients.  We will update our materials as additional information becomes available.
We have provided sections below specific to your client type. Please check back to this page periodically for updates and further information.
Relief available to clients from these ActsLabor Unions
Eligible for:
       Employee Retention Tax Credit
       EIDL Loan or Advance

Employee Retention Tax Credit (for Unions)
How these programs interact with each other
SBA Payroll Protection Program and Economic Injury Disaster Loans
Tax filing extensions

Welfare and Pension Plans
Eligible for:
       Employee Retention Tax Credit
       EIDL Loan or Advance

       Note: If the benefit…

CARES and Family First Acts provide potential relief for Unions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Families First Coronavirus Response Act both provide potential relief for nonprofit associations.

We are still awaiting important details on the many provisions of the Acts, but we wanted to provide a summary of some of the programs which will be of interest to our Union clients. We will update this bulletin as additional information becomes available.

Update for Union Clients