Which Expenses Can Be Reimbursed From Plan Assets?

Stacey Bradford, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

Good question! Though the regulations do not provide for a listing of all the possible type of plan expenses and whether or not they can be reimbursed from plan assets, the Department of Labor has published guidance on the subject that does provide specific, real-world examples. In addition, Groom Law has published a plan expenses chart that lists expenses that are permitted and not permitted. 

As you can see from the guidance, and as referenced in a prior Ask the Experts column on the subject, so-called “settlor” expenses, which confer a benefit on the plan sponsor, as opposed to plan participants, are one type of expense that clearly cannot be reimbursed from plan assets. Outside of settlor expenses, the guidance makes it fairly clear that types of expenses that are directly related to plan management, such as implementing plan changes, calculating benefits, communicating plan information to participants and beneficiaries, nondiscrimination testing, drafting plan amendments to maintain tax-qualified status, requesting determination letters, and Form 5500 preparation (including audit work, if applicable) can be reimbursed from plan assets. Keep in mind, however, that non-settlor expenses must be reasonable in order to be reimbursed from plan assets.

Furthermore, sometimes it is not clear if an expense is directly related to plan management and thus reimbursable by the plan. This is particularly true if the plan sponsor wishes to reimburse all or a portion of the salary expense of employees who work on the retirement plan. When in doubt, counsel with specific expertise in this area should be consulted prior to any expense reimbursement.

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Rebecca.Moore@strategic-i.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.