On Which Side of the Fence Are Your Retirement Plan Expenses?

Posted by on April 11, 2012 under Retirement | Comments are off for this article

Permissible Plan Expenses and Those That Fall on the Wrong Side of the Fence: On Which Side of the Settlor Fence Do Your Plan Expenses Fall?

It is a simple concept: retirement plan expenses are either payable from the plan’s assets or they are not. In practice, it can be much more difficult.

The Employee Retirement Income Security Act (ERISA) requires the plan fiduciary to evaluate all fees paid by the plan to ensure those expenses are related to a necessary fiduciary function. The kicker is, many expenses incurred by a plan are not related to a fiduciary function but are instead settlor in nature and are not permissible plan expenses. Expenses that fall outside of the fiduciary bucket must be paid for directly by the employer and may not come out of, derive from, or originate from plan assets. The failure to pay an expense from the proper source can result in significant penalties and costs for a plan sponsor.

Settlor Functions vs. Fiduciary Functions

In retirement plan sponsorship, one of the most difficult questions to address is, What are the differences between settlor and fiduciary functions?

Settlor functions are those that relate to the employer’s business, such as the establishment, design, or termination of a plan. All…

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Jessica Skinner

Jessica Skinner
Compliance Attorney
Kansas City, MO

Jessica Skinner is the compliance attorney for Lockton Investment Advisors, LLC and Lockton Financial Advisors, LLC. Prior to joining Lockton, Jessica practice securities law at a boutique securities law firm specializing in investment advisor and broker dealer compliance, as well as corporate governance.

The communication is offered solely for discussion purposes. Lockton does not provide legal or tax advice. The services referenced are not a comprehensive list of all necessary components for consideration. You are encouraged to seek qualified legal and tax counsel to assist in considering all the unique facts and circumstances. Additionally, this communication is not intended to constitute U.S. federal tax advice, and is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending any transaction or matter ...

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