Considerations for ERISA Spending Accounts | Maillie LLP

Considerations for ERISA Spending Accounts

by Edward Fronczkowski, CPA, Partner

efronczkowski@maillie.com

As plans grow and regulations become more cumbersome, the fees and expenses charged to plans continue to increase.  These fees are either born by the plan sponsor or are paid from plan assets.  To combat these increasing costs, we are seeing more plans turn to revenue sharing. 

With a revenue sharing plan, the plan’s record keeper receives payments from the mutual funds in the plan. These payments are based upon an agreed upon percentage of the total amount the plan has invested in that fund.  If the revenue received by the record keeper is more than what the plan has agreed to pay as compensation for their services, the excess amount is returned to the plan.  The plan is then able to use those funds to pay expenses that are prudent and appropriate for the plan to pay out of plan assets. Any amounts remaining at the end of the year must be allocated to the participants.  ERISA Spending Accounts are a relatively new concept and can create an opportunity to reduce the total cost charged to the plan.

If you have questions please contact your Maillie LLP representative.