General principles of allowable expenses include the following:
– The expenses must be necessary for the administration of the plan.
– The plan’s document and trust agreement must permit use of plan assets for payment of expenses.
– The expenses must be reasonable and incurred primarily for the benefit of
– The expense cannot be the result of a transaction that is a prohibited transaction under ERISA, or it must qualify under an exemption from the prohibited transaction rules.
In light of today’s plan fee environment, it is incumbent upon fiduciaries to request full disclosure of fees and expenses, how they breakdown with services provided, as well as a request for full explanation of who will be the recipient of fees. Ultimately, the ability to pay expenses from a plan trust is a facts and circumstances determination that needs to be made by plan fiduciaries. Because it is possible that the DOL may challenge such determinations it is important that fiduciaries consult ERISA counsel prior to paying
questionable expenses from a plan trust and document the decision and reasoning.