Are there any written rules regarding the allocation of fees among participants?

We normally process these pro-rata based on account balance (a 0.5% fee is taken from each participant's account, for a total fee of 0.5% of plan assets).

Now have a client asking if the fee can be taken per-capita:
$2,000,000 in assets x 0.5% fee = $10,000 total fee / 20 participants = $500 paid from each participant's account

Only reasonable expenses can be paid from plan assets. If a plan were to charge a flat $500 per participant, would it be reasonable to charge that $500 fee to a new participant who is beginning to contribute at a rate of $50 a month? If not, that $500 can't be paid from the plan assets. Nothing that I'm aware of gives a bright line test on reasonableness, but I can see where a per capita expense allocation could be problematic. Have you checked the document to see if it stipulates how fees are to be allocated?

The U.S. Labor department's non-rule interpretation is Field Assistance Bulletin 2003-3.

http://www.dol.gov/ebsa/regs/fab_2003-3.html

Among other points, the FAB includes some discussion on how a fiduciary might consider which expenses should be allocated by balances, and which by the number of participant, beneficiary, or alternate-payee accounts (without regard to a balance).