This month we have a question about how to pay plan expenses and what is the best option from a fiduciary liability standpoint…
Erick, with two options for paying 401(k) plan expenses — either from company assets or plan assets — we wonder if there is a fiduciary argument for one over the other.
Answer: Thanks for asking a great question! Thanks for asking.
One fiduciary argument springs immediately to mind: there is no risk of excessive fees being charged to participant accounts if the company is footing the bill. Still, it’s a good question to ask when structuring a new plan, or re-examining an existing one. Besides the fiduciary liability
benefit, there are several other reasons paying plan fees with company assets could benefit both the company and plan participants, according to Capital Group.
First, because plan fees are tax-deductible, paying from company assets may result in tax savings. Second, it can improve transparency to participants, which may contribute to employee relations efforts. Paying from company assets may also mean more investable assets. Not only could that result in better pricing, it may lead to higher account balances for participants down the road.
Do you have a question about your 401k or company-sponsored retirement plan?