Under provisions of the Employee Retirement Income Security Act (ERISA), one of the primary responsibilities of plan fiduciaries is to operate a plan exclusively in the interest of participants and beneficiaries. As fiduciaries of the plan, trustees must provide sufficient detail to support expenses incurred such as hotel, meal, and travel costs. The following recommendations should be utilized to ensure sufficient detail of expenses incurred.
Guidelines describing acceptable detail of expenses are typically addressed in a plan’s expense reimbursement policy. We recommend that all plans adopt a formal expense reimbursement policy, which includes the following as appropriate guidelines for providing sufficient detail of expenses incurred.
Sufficient detail of trustee expenses should include the “5 Ws” –
In most instances, the “what,” “when,” and “where” are satisfied on the face of the supporting documentation. The “who” and “why” usually require additional documentation. Notations should be written on the supporting documentation providing sufficient information to satisfy any of the “5 Ws” that are not clearly indicated on the documentation.
When credit card charges are incurred, trustees must maintain original receipts for each charge, including itemized hotel invoices, transportation costs, and itemized meal receipts. When dining with other individuals, supporting documentation must include written explanation of the specific business conducted and full names and titles of those persons who incur the meal and beverage charges. In the case of lodging, airfare, and other travel expenses, additional information identifying the purpose for the travel must be documented.
Reimbursed meal and entertainment expenses require the names of all individuals present for such expenses, the location(s) where those expenses are incurred, and the nature of the business requiring the expenses. If a vendor is unable to provide documentation for an expense, notation must be made which clearly identifies the date, amount, purpose, and location where the expense is incurred, separately indicating that a receipt was not provided for the expense. It is recommended that the required information be documented on the receipt or invoice at the time the expense is incurred. Itemized restaurant receipts showing items consumed are required wherever available.
In addition to maintaining sufficient documentation of expenses, trustees should be aware of new reporting requirements for Form 5500, Schedule C. Schedule C must be completed to report persons who rendered services to or who had transactions with a plan during the reporting year if the person received, directly or indirectly, $5,000 or more in reportable compensation. Form 5500, Schedule C instructions specifically state the following, “For Schedule C purposes, reportable compensation includes money and any other thing of value (for example, gifts, awards, trips) received by a person, directly or indirectly, from the plan in connection with services rendered to the plan, or the person’s position with the plan.” Certain rules for non-monetary compensation of insubstantial value also apply.
For additional information about Schedule C reporting, click here. The frequently asked questions about Schedule C reporting are available on the Department of Labor Employee Benefits Security Administration website at www.dol.gov/ebsa/faqs.
Please let us know if you have any questions or want to talk to us further about your plan’s expense reimbursement policy.
By Chad A. Fennell, Manager, firstname.lastname@example.org