Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

The following is not meant to be legal advice.

Hypothetical:  One of the plan participants (former employee) at a company’s 401(k) plan asks for a rollover distribution.  The employee says he is charged a $20 check fee from the trust company, and a $30 record keeping fee from participant services.  After the former employee receives the rollover distribution, another $10 in short term gains went into the former employee’s account.  The former employee had a final balance of $10, but the person could not get the final balance because it was less than the amount of the $20 check fee.  The participant complains that he should get all of his money back because it is 100% vested.  The employer did not match or contribute anything.  Is the employer required to reimburse the fees and give back the $10 balance if the employer never disclosed that the participant had to pay the fees versus the employer?

A plan may charge reasonable fees to administer the plan but the fees should be disclosed in the plan.  If it were a responsible employer, who would review the participant documents on a yearly basis, the employer would have a page in the summary plan description on the fees.  An irresponsible employer, such as that run by a CFO of a technology company in Oakland, CA, who had little experience at a public company, prior to becoming CFO, might fail to amend a summary plan description document, for disclosure of fees, and leave a summary plan description outdated the way it was written when the plan went into effect.  Though, if a plan document does not properly disclose the fees, the plan administrator, no matter how incompetent, may unlikely be in breach of fiduciary duties or be caught for impropriety if the fees deducted from a participant’s account are not out of line.