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Allocating Administrative Costs in Defined Contribution Retirement Plans

By Mark Poerio and Eric Keller
March 01, 2004

The Employee Benefit Security Administration of the Department of Labor (DOL) has recently announced a more liberal view toward charging tax-qualified retirement plan expenses against the accounts of participants in 401(k), ESOP, and other defined contribution plans. This article provides a brief overview of the kinds of expenses that plans may pay, and explains how the new DOL guidance provides employers and plan sponsors with greater flexibility in allocating these expenses to participant accounts.

Expenses that Plans May Pay:
Administrative v. Settlor Decisions

Employers are not required to pay all costs associated with the maintenance of their tax-qualified retirement plans. While the DOL has long recognized that there are occasions under which plans may pay plan expenses, most employers proceed with caution in deciding to pay plan expenses from plan assets, because that decision is a fiduciary act under the Employee Retirement Income Security Act (ERISA).

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