Employee Benefits E-Update for February 2, 2004

February 2, 2004

EMPLOYEE BENEFITS E-UPDATE

401(k) Plan Costs May Be Charged to Former Employees

In Revenue Ruling 2004-10, the IRS permits 401(k) plans and other defined contribution plans to charge the accounts of former employees for a pro rata share of the plan's reasonable administrative expenses, even if the plan does not charge current employees for similar expenses. This ruling is a companion to the Department of Labor's Field Assistance Bulletin 2003-3, in which the same conclusion was reached in recognition that plan sponsors have a certain amount of leeway in charging plan expenses. Based on this guidance, plans may impose administrative expenses on participants who no longer work for the employer as a way of encouraging the former employees to take distributions when they leave. For more information on the IRS ruling, see http://www.irs.gov/pub/irs-drop/rr-04-10.pdf. For a copy of the DOL Field Assistance Bulletin, see http://www.dol.gov/ebsa/regs/fab_2003-3.html.

For further information, contact:

James D. Kemper
(317) 236-2293
james.kemper@icemiller.com

Janine H. Bosley
(202) 824-8618
janine.bosley@icemiller.com

Ice Miller is a full-service law firm with offices in Chicago, Indianapolis and Washington, D.C. The 30 employee benefits professionals of Ice Miller provide legal and consulting services for retirement and health and welfare benefits and executive compensation to public and private employers, financial institutions, insurance companies and other types of benefit service providers.

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This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.