Charging Participants for Distributions
In May, we sent out a broadcast email on the subject. It is located on our website at http://www.reish.com/publications/pdf/pr.pdf.
Unfortunately, many plan sponsors-—and their advisors-—were caught off guard by the DOL’s position that, if participants are going to be charged for distributions, the summary plan description needs to point out that the charge will be made in connection with the distribution. The failure to do so could result in a claim by participants that they were improperly charged for those transactions.
As a result, if you charge participants for distributions, you should review your SPD to make sure that it is explained in adequate detail. We recommend that the SPD disclose both the nature and the amount of the charge.
If you do assess that charge, but do not disclose it in the SPD, we recommend that you speak to your ERISA attorney about the possible defects in your plan operation. Also, if you do not currently charge for distributions, but are thinking about changing that practice, you should consult an ERISA attorney first—the IRS has recently expressed reservations about certain aspects of these charges.
© 2003
Reish Luftman Reicher & Cohen. All rights reserved. The ERISA Report for Plan Sponsors is published as a general informational source. Articles are general in nature and are not intended to constitute legal advice in any particular matter. Transmission of this report does not create an attorney-client relationship. Reish Luftman Reicher & Cohen does not warrant and is not responsible for errors or omissions in the content of this report.
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