Settlor Expenses

Did you know some plan related expenses can be paid out of plan assets? These are called non-settlor expenses. Non-settler expenses usually benefit participants or relate to the ongoing qualification of the plan. Settlor expenses are not eligible to be paid out of plan assets and usually relate to services that benefit the plan sponsor.

Some examples of non-settlor expenses eligible to be paid out of plan assets include preparation of annual valuation reports and Form 5500s, PBGC Premium filings, participant benefit calculations, annual benefit statements, required plan amendments, and participant notices. These are only a few examples and is not an exhaustive list.

On the other hand, some examples of settlor expenses include optional amendments to terminate a plan or change the benefit structure, analysis regarding changes to the plan, consulting whether to adopt a plan, the initial plan and trust documents and ASC 715 accounting related calculations and consulting.

Note that once the decision to terminate the plan is made, many of the steps needed to complete the termination of the plan are required for qualification and benefit the participant. These steps are non-settlor expenses.

The determination of settlor vs non-settlor expenses is a fiduciary move, so take prudence when deciding what fees to pay out of plan assets. If necessary, don’t hesitate to reach out to your IAI consultant for additional information.

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