Payment of Plan Expenses: Part 2 (Posted July 15, 2001) Technical Tip 16: What expenses can be paid with plan assets and what must be paid by the employer? This "tip" is a followup to Q&A #15. It represents a departure from our usual format in that the question and answer are not taken from a presentation by DOL representatives. However, the answer is based on DOL Advisory Opinion 2001-01A (the Stoney letter) and related hypotheticals published by the DOL along with that Opinion. The Stoney letter follows the general outline discussed in Q&A #15, retaining the distinction between "settlor" expenses and "fiduciary" expenses. The Stoney letter itself addresses the specific question of whether expenses related to maintaining the tax-qualified status of an employee pension plan must be apportioned between the plan and the employer, since each benefits from qualification. The DOL specifically rejects the concept of apportionment and says that expenses related to maintaining the tax-qualified status of the plan may be borne by the plan, including discrimination testing, amending the plan to comply with tax law changes and applying to the IRS for a favorable determination letter covering those changes. The DOL then takes the unusual step of publishing six hypothetical examples in which it discusses various expenses and whether they are settlor or fiduciary. In substance, the DOL indicates that expenses related to a change in plan design -- for example, adding an early retirement window or a loan program to the plan -- including feasibility studies, studies regarding the impact of the change on the employer, the cost of amending the plan and the cost of applying for a favorable determination letter respecting the change, must be borne by the employer. However, the cost of determining the impact of the change on participants and communicating with them about it would normally be a proper plan expense once the change has been put in place by the employer. To review the Opinion and the hypotheticals published by the DOL, click here. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.