Skip to content
Retirement

Pay Plan Expenses with Plan Assets – How and When

The Baldwin Group
|
Updated: March 19, 2025
|
1 minute read

Some retirement plan expenses can be paid for with plan assets — but many can’t. Which are the “reasonable and necessary” retirement plan expenses that can be paid out of plan assets?

Generally, services required to maintain the plan’s compliance and administration can be paid from plan assets. Obvious examples include the annual nondiscrimination testing and preparation of the annual Form 5500. Another example is a plan amendment or restatement that is required due to legislative changes.

Optional services generally cannot be paid out of plan assets. One clear example is costs for projections that are optional and benefit the company, not the plan participants.

Some service fees may not be easy to classify. For example, fees for resolving plan corrections, such as delinquent deferral remittances or contributions determined with a definition of compensation that are not supported in your plan document. In the event of an incorrect test result, regardless of who was at fault, the law ultimately holds the plan sponsor responsible for the proper maintenance of the plan. As a result, the plan sponsor cannot shift the financial burden for the corrections to the plan.

All in all, it’s perfectly acceptable and common to charge reasonable and necessary transaction-based and recordkeeper administrative fees to participants. However, it is critical to ensure that similarly situated participants are treated the same. It would be discriminatory and, therefore not allowed, for non-highly compensated employees to pay administrative fees while highly compensated employees did not.

This communication is for informational purposes only and does not purport to be a complete statement of all material facts related to any regulation, company, industry or security mentioned. The information provided while not guaranteed to accuracy or completeness has been obtained from sources believed to be reliable. The opinions expressed reflect our judgment now and are subject to change without notice and may or may not be updated. FSC.2024.58

FSC.2024.59


Related Insights

Stay in the know

Our experts monitor your industry and global events to provide meaningful insights and help break down what you need to know, potential impacts, and how you should respond.

Construction
Construction Risk Management Guide: Reduction & Mitigation
Managing Risk in the Construction Industry Construction projects are inherently complex, involving numerous stakeholders, materials, and processes. With so many...
Commercial Risk
Business Liability Insurance Costs: Key Price Drivers
Understanding Business Insurance Costs Protecting a company against liability is essential for business owners, CEOs, CFOs, and risk managers. Business...
Construction
Errors and Omissions (E&O) Insurance: What is it & Who Needs it?
What is Errors and Omissions (E&O) Insurance? Errors and omissions (E&O) insurance offers essential protection for professionals and companies providing...
Commercial Risk
Successfully Maintaining Global Compliance
Key considerations and insights As companies pursue opportunities in global markets, remaining compliant at the local, national, and international levels...
Commercial Risk
Impact of AI on Management and Cyber Liability
In a recent study, McKinsey found that in early 2025, 78% of respondents said their organizations use AI in at...
Let's make it possible

Partner with us to build solutions that align with your business, individual, or employee needs and open new possibilities for your future.

Connect with us