[Code of Federal Regulations]
[Title 29, Volume 9]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR2550.408c-2]

[Page 515-516]
 
                             TITLE 29--LABOR
 
 CHAPTER XXV--EMPLOYEE BENEFITS SECURITY ADMINISTRATION, DEPARTMENT OF 
                                  LABOR
 
PART 2550_RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY
--Table of Contents
 
Sec. 2550.408c-2  Compensation for services.

    (a) In general. Section 408(b)(2) of the Employee Retirement Income 
Security Act of 1974 (the Act) refers to the payment of reasonable 
compensation by a plan to a party in interest for services rendered to 
the plan. Section 408(c)(2) of the Act and Sec. Sec. 2550.408c-2(b)(1) 
through 2550.408c-2(b)(4) clarify what constitutes reasonable 
compensation for such services.
    (b)(1) General rule. Generally, whether compensation is 
``reasonable'' under sections 408 (b)(2) and (c)(2) of the Act depends 
on the particular facts and circumstances of each case.
    (2) Payments to certain fiduciaries. Under sections 408(b)(2) and 
408(c)(2) of

[[Page 516]]

the Act, the term ``reasonable compensation'' does not include any 
compensation to a fiduciary who is already receiving full-time pay from 
an employer or association of employers (any of whose employees are 
participants in the plan) or from an employee organization (any of whose 
members are participants in the plan), except for the reimbursement of 
direct expenses properly and actually incurred and not otherwise 
reimbursed. The restrictions of this paragraph (b)(2) do not apply to a 
party in interest who is not a fiduciary.
    (3) Certain expenses not direct expenses. An expense is not a direct 
expense to the extent it would have been sustained had the service not 
been provided or if it represents an allocable portion of overhead 
costs.
    (4) Expense advances. Under sections 408(b)(2) and 408(c)(2) of the 
Act, the term ``reasonable compensation,'' as applied to a fiduciary or 
an employee of a plan, includes an advance to such a fiduciary or 
employee by the plan to cover direct expenses to be properly and 
actually incurred by such person in the performance of such person's 
duties with the plan if:
    (i) The amount of such advance is reasonable with respect to the 
amount of the direct expense which is likely to be properly and actually 
incurred in the immediate future (such as during the next month); and
    (ii) The fiduciary or employee accounts to the plan at the end of 
the period covered by the advance for the expenses properly and actually 
incurred.
    (5) Excessive compensation. Under sections 408(b)(2) and 408(c)(2) 
of the Act, any compensation which would be considered excessive under 
26 CFR 1.162-7 (Income Tax Regulations relating to compensation for 
personal services which consitutes an ordinary and necessary trade or 
business expense) will not be ``reasonable compensation.'' Depending 
upon the facts and circumstances of the particular situation, 
compensation which is not excessive under 26 CFR 1.162-7 may, 
nevertheless, not be ``reasonable compensation'' within the meaning of 
sections 408(b)(2) and 408 (c)(2) of the Act.

[42 FR 32393, June 24, 1977]