Increased Focus on Retirement Plan Fees By: Angela Johnson, CPA Date: 10/22/09 Every few years, a hot topic emerges in the realm of employee benefit plans.  Recently it has been an increased interest in fees charged retirement plans.  If any fees are paid to service providers out of your 401(k) or ESOP plan, you may want to consider a few things. Some background first: In order to protect retirement plans, the Employee Retirement Investment Security Act (ERISA) determined that no "party-in-interest" should benefit financially from their relationship with the plan and as such all monetary transactions between the plan and the party-in-interest became prohibited transactions - an ominous designation which comes with hefty regulatory penalties.  Parties-in-interest are anyone that has a relationship with the Plan.  Consequently, plan service providers are considered a "party-in-interest" by ERISA.  So on the surface, it would appear that plans could never be charged for services necessary to function.  Therefore special exceptions were written into the regulations to allow the plans to make reasonable payment for necessary services. Since plan participants are not able to review and authorize their portion of the fees charged to the plan, this duty then falls to the plan trustee or administrator.  The fiduciary responsibility demanded by this position requires prudent decisions be made on behalf of the plan.  Therefore, in order to qualify for this special exemption made by ERISA, charges are required to be properly reviewed and approved by a plan fiduciary to verify the charges are reasonable. It is not enough, however, for plan administrators or trustees to simply rubber stamp the bills received from service providers.  They must document a thorough review of the bills to verify that they are accurate, appropriate, and necessary.  Indeed, this documentation is critical in protecting the plan's management and sponsor from regulatory action and lawsuits for negligence. In today's economic and political climate, neither participants nor governmental agencies want to see excessive or unnecessary fees being paid by retirement plans.  The more tightly these expenses are monitored and controlled, the more funds will be available for retirees when they are needed, something that makes everyone happy.