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Related Practices
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IRS Follows DOL Lead Concerning Charging Plan Expenses to Accounts of Former EmployeesFebruary 4, 2004Our Summer 2003 Employment and Benefits Newsletter discussed the Department of Labor's Field Assistance Bulletin 2003-3, which provided guidance about circumstances in which plan expenses could be paid from plan assets, and could be charged to the accounts of participants. (In its Bulletin, the DOL stated that plans may charge reasonable plan expenses to the accounts of vested separated individuals without regard to whether the accounts of active participants (i.e., current employees) are being charged such expenses. We noted that the IRS might not agree that such a procedure could be followed in light of certain tax law requirements. Now, in Revenue Ruling 2004-10, the IRS has followed the DOL's lead and confirmed that the tax law would permit reasonable plan administrative expenses to be charged to the accounts of former employees and their beneficiaries (in proportion to each participant's account balance compared with total plan account balances), even if the plan does not so charge the accounts of current employees. The IRS cautions that the nondiscrimination rules nevertheless continue to apply in evaluating the method used to charge expenses among accounts and the timing of any amendment changing how a plan deals with this issue.
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