Restoration Payment for Redemption Fee (Posted June 22, 2004) Technical Tip 123: The following question and answer were from the IRS Q&A Session at the 2002 ASPPA Annual Conference: What are the consequences of a securities broker making a restorative payment to a plan because of concern over a suit for failing to give adequate notice to the sponsor and the participants that a mutual fund has a short-term redemption fee? Response: Under the facts, it seems unlikely that there would be a reasonable risk of fiduciary liability. However, it is inherently a factual determination. Comment by the RLR&C ERISA attorneys: Ordinarily, restoration payments are made by a fiduciary to a plan to restore losses attributable to a breach by that fiduciary. However, similar payments can be made by any provider to a plan who causes a loss because of a breach of duty (e.g., breach of contract or negligence). In either case, there needs to be a genuine and supportable claim of a breach of duty resulting in the loss. Apparently, under the facts of this hypothetical, the IRS panelist felt that there was not an adequate basis for asserting that a breach had occurred and/or that there was a legitimate case or controversy. View all Tips © 2008 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.