Multnomah Group

Defining Expense Accounts

Multnomah Group White Paper
July 2017

What IS a Plan Expense Account, also known as an ERISA Account, ERISA Budgets Account, or Revenue-Sharing Account, to name a few? Simply put, it’s an account within the Plan to which your Plan’s recordkeeper makes deposits to be used by the plan administrator. The plan sponsor can use these funds to pay eligible plan operating expenses. Eligible plan operating expenses can be any non-settlor fees permitted by the plan, including but not limited to, communications and education costs, adviser fees, nondiscrimination testing, and plan audits. Anything that is a permissible payment may be paid by plan assets can be paid out of the expense account because these accounts are typically considered plan assets. Plan Expense Accounts have gained increased prominence in qualified retirement plans. As the size of the average defined contribution plan grows, and plan sponsors become more aware of their obligations to monitor fee reasonableness, sponsors have gained the ability to leverage their asset bases to reduce marginal plan costs. Employers have successfully negotiated lower expense investments, reduced servicing fees, and asked the vendors to create Plan Expense Accounts.

As the Department of Labor and plaintiff’s attorneys continue to make headlines about the need for plan sponsors and participants alike to understand retirement plan and investment product fees, fiduciaries have come to understand the diseconomies of scale in the current defined contribution system. The fiduciary community has become more cognizant of their obligation to understand what is being paid to service providers, both direct and indirect, and to negotiate what is reasonable. In the years ahead, plan sponsors will be forced to ask whether the escalating revenues generated by larger asset bases cause compensation for retirement services to exceed the bounds of reasonableness.

To read the full white paper, please use the submission box in the right-hand column.

White Paper

To download this white paper, please fill out the form below.