Recent Posts:What Expenses Can Be Paid From Our 401(k) Plan?Plan Sponsors frequently ask if the audit fee can be paid from Plan assets? From a regulatory standpoint, it is legal for the Plan to pay eligible expenses (such as 401k audit fees, investment advisor charges, TPA fees, etc.) if the Plan has been properly structured and doesn’t contain language which would expressly forbid. To verify, consult your base plan document and/or adoption agreement and discuss with the Plan’s record keeper/third-party administrator. In our experience, nearly all Plans are structured to allow paying eligible expenses; it is also possible to amend your Plan if you don’t find the answer you were hoping for. Fees paid by the Plan are funded by liquidating assets or utilizing available forfeiture balances. These charges are allocated among participants in one of two ways – (1) prorated among the participant base based on balances in the plan or (2) the same flat dollar amount is charged to every individual participating in the Plan. A follow-up question we receive is what are other 401(k) plans doing? This decision is unique to each Plan Sponsor and, accordingly, we see a great divergence in practice. We estimate that 25% of our clients pay the audit fee (or some portion of the fee) using Plan assets. We have not identified any trend in the decision-making process based on the size of the plan. We audit plans holding $50M+ in assets where the company pays nearly all related expenses. Conversely, we audit smaller plans holding less than $1M who absorb expenses in excess of $25k. As you weigh the decision on what eligible expenses to process through your 401(k) Plan, remember participants receive quarterly statements. If you run significant expenses through the Plan, ultimately someone will ask what these fees represent? A well thought out response will ensure that this doesn’t turn into an uncomfortable conversation for your HR team. Scott M Dufek, CPA | 05/28/2017
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