Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

The following is not meant to be legal advice.

What is considered a reasonable administrative fee under ERISA Section 206?  Do most people assume that there are fees when they sign up for 401(k) accounts?

Under ERISA Section 206, if a 401(k) participant is not satisfied that a reasonable administrative fee was deducted from his/her account when he liquidates or transfer the amount in the 401(k) account to another institution, he/she may have the administrator of the 401(k) plan review the fee by filing a claim.  In 30 – 45 days after the claim is filed, the administrator of the 401(k) plan must respond.

However, some administrators of 401(k) plans may not be well versed in the fees associated with the plans.  They may be put in the administrator roles without training or education as to their duties.  Take for instance, the CFO of an Oakland, CA based technology company who was promoted to CFO from being a controller when the executives of the company started to resign after the company started to hit low sales and cash levels. 

In one incident, the particular CFO forwarded a participant’s inquiries to Bret Cameto, a financial adviser at Merrill Lynch.  Cameto could not answer the participant’s question except to state the obvious that the fees deducted from the person’s account were not plan related expenses.  How can a participant be obligated to pay fees if he/she is not a party to a contract that states he/she is to pay the fees?  There is no privity?  Cameto states that the information is found in a recordkeeping service agreement and schedule, but does not forward the document to the participant to read.  Instead, Cameto forwards the document to the plan administrator to forward to the participant.  However, the plan administrator never forwards the document to the participant, and the participant is left without further explanations.  Cameto ends his phone conversations with the participant by berating the participant for questioning the fees in the first instance.