ERISA Plan Expenses: When Can The Plan Pay The Tab?

Plan sponsors can pay ERISA plan expenses themselves or, under certain circumstances, from plan assets. Understanding what costs can be expensed to the plan — and which expenses should come out of the employer's piggy bank — can be complex. This article provides a guide to assess whether expenses can be paid with plan assets and key considerations for plan fiduciaries about the use of plan assets for expenses.

ERISA Legal Framework

Under ERISA Section 404, a plan must be maintained for the exclusive benefit of plan participants and their beneficiaries. This rule is commonly known as ERISA's "exclusive benefit rule," and it prohibits employers from diverting assets for the employer's own benefit. Like most rules, there are exceptions to the exclusive benefit rule, including the use of plan assets to pay reasonable plan expenses. Although a plan's payment of expenses is not a benefit to participants, it is permissible under the exclusive benefit rule if the