Labor Department Issues Guidance on Plan Expense Policy

Some expenses of ERISA plans, including ESOPs and 401(k) plans, can be paid for by the plan. In Advisory Opinion 2001-01A, the Pension Welfare Benefit Administration (PWBA) has issued new guidance on when the plan can pay for various tax qualification and other plan functions.

Expenses related to so-called "settlor" functions cannot be paid for by the plan. Settlor functions are those relating to the establishment, termination, or design of the plan, except to the extent changes in plan rules or operations are mandated by changes in law and/or regulations or by requirements of anti-discrimination testing. Changes in the plan that are optional, such as changing the vesting schedule in an ESOP to extend the repurchase obligation period, would not be plan expenses. On the other hand, required administrative filings (including letters of determination) and expenses relating to the ongoing operation of the plan under its current terms would be allowed plan expenses.

For more detail, go here on BNA's site for a full text of the opinion.