Advisory Opinion 1975-145

Dear :

Your letter of February 6, 1975, addressed to Mr.                                                       of the                                                   Regional Office, has been referred to this office for reply. In your letter you requested an interpretation under ERISA IB 75-1 (December 31, 1974) as to whether successor trustees of a plan who are so designated after July 1, 1974, may receive compensation for service rendered as trustees to the plan.

Section 408(c)(2) of the Employee Retirement Income Security Act of 1974 (the Act) provides, as here relevant, that fiduciaries with respect to employee benefit plans are not prohibited from receiving reasonable compensation for services rendered to a plan, provided that they are not already receiving full-time pay from an employer, or association of employers, whose employees are participants in the plan, or from an employee organization whose members are participants in the plan. This provision expressly does not preclude reimbursement for expenses properly and actually incurred by any plan fiduciary.

As indicated in ERISA IB 75-1, a person serving as a fiduciary for a plan who already receives such full-time compensation as is referred to above, may continue to receive reasonable compensation until June 30, 1977, for services rendered to the plan, notwithstanding the limitations of section 408(c)(2), provided that the conditions of section 414(c)(4) of the Act are met and further provided that such person was a fiduciary prior to July 1, 1974. The provisions of section 414(c)(4) are, therefore, clearly limited in the situation described in your letter to successor trustees who were so designated prior to July 1, 1974. Consequently, a successor trustee so designated after June 30, 1974 is prohibited from receiving compensation as a trustee if he or she is already receiving full-time pay from an employer, or an association of employers, whose employees are participants in the plan, or from an employee organization whose members are participants in the plan. Such a trustee may, of course, receive reimbursement for expenses properly and actually incurred.

Since the question you have raised also related to provisions of section 4975 of the Internal Revenue Code of 1954 (the Code) and section 2003(c)(2)(D) of the Act which are similar to those provisions of the Act referred to above, and to IRS TIR-1329 which is similar to ERISA IB 75-1, we have conferred with representatives of the Internal Revenue Service regarding this matter and they concur in the views set forth herein.

In addition, on April 28, 1975, notice was published in the Federal Register (40 FR 18471) that the Labor Department and the Internal Revenue Service have adopted a procedure (ERISA Proc 75-1; Proc 75-26) for the submission of applications under section 408(a) of the Act and section 4975(c)(2) of the Code for exemptions from the prohibited transactions provisions of section 406 of the Act and section 4975(a), (b) and (c)(1) advising your clients with respect to this matter.