COLLECTED WISDOM™ On Revenue Sharing Within 401k Plans

It is imperative that plan sponsors with fiduciary oversight of their organization's 401k retirement plan understand the distribution systems that most investment management organizations use and how they share revenue, revenue that is an assets of the 401k plan.

Here is information to help you understand the issue of revenue sharing.

What Are Your Fiduciary Duties Regarding Revenue-Sharing Arrangements? - Summary: The trend toward disclosure and transparency is well under way and is accelerating. Once fiduciaries are regularly receiving the additional information on fees, expenses, and revenue sharing, the expectations for fiduciary prudence will be heightened. Fiduciaries will be expected to review and evaluate the information they receive and to make informed decisions for the benefit of the participants. Located at: Reish Luftman Reicher & Cohen, October 2008. Click on headline for full article.

ERISA Revenue-Sharing Litigation Update - Summary: Over the past two years, numerous putative class actions have been filed challenging alleged revenue-sharing practices in connection with 401k plans and other types of pension plans. This is a summary of the decisions and a brief update on the current state of the litigation. Located at: Sutherland Asbill & Brennan LLP , October 2008. Click on headline for full article.

Companies Move to Ward Off Fee Suits - Summary: Defined-contribution plan executives are beefing up disclosure to participants about plan fees well ahead of regulatory guidance expected by the end of the year. Located at: Workforce.com (free registration may be required), July 2007. Click on headline for full article.

GAO Study Finds Undisclosed Conflicts Reduce Pension Plan Returns - Summary: Pension plans may earn substantially lower rates of return when they are assisted by consultants who have significant conflicts of interest that are not disclosed, according to this new report released Government Accountability Office. Located at: US House Education and Labor Committee , June 2007. Click on headline for full article.

Revenue Sharing and Indirect Payments - Summary: The rule is that fiduciaries have to know about money or any other thing of value that is being paid indirectly to any plan provider or service provider—-if a payment relates to the plan or to any plan transactions. Located at: Reish Luftman Reicher & Cohen, June 2007. Click on headline for full article.

Uncovering and Understanding Hidden Fees in Qualified Retirement Plans - Summary: In the United States, the level of concern over 401k fees is steadily increasing. However, very few employers understand the nature and scope of the retirement plan industry's business model. Not even the Federal Government fully grasps the issue. Understanding how hidden fees came about, and recognizing the specific types and amounts of such fees, will help employers make better decisions regarding 401k services. Located at: 401khelpcenter.com , February 2007. Click on headline for full article.

SEC Launches Sweep Examination of Mutual Fund 401k Payments - Summary: McHenry Consulting announced the release of a client alert detailing a new sweep examination currently under way by the Securities Exchange Commission. The SEC study targets industry compensation practices in the distribution of defined contribution retirement plan products and services. McHenry's four page notice provides a complete list of questions sent to mutual fund companies by the SEC over the past several weeks. The twenty-five questions delve deeply into the who, what, why, how and "how much" of retirement product compensation. Located at: McHenry Consulting , July 2004. Click on headline for full article.

Fees are Looming as the Basis for the Next Wave of Lawsuits Against 401k Sponsors - Summary: For a long time, no one cared that much about mutual fund fees. Good investment returns through most of the 1980's and 1990s obscured the costs participants bore and since, for the most part, participants paid the fees, defined contribution plan sponsors paid little attention as well. However, plan sponsors had better start caring, because mutual fund fees most likely will be the focus of the next generation of ERISA class action lawsuits, some prominent pension attorneys say. Located at: Plansponsor.com (free registrations required), July 2004. Click on headline for full article.

Uncovering Hidden 401k Fees - Summary: As a plan decision-makers, you can have a significant impact on the cost of your plan. You can lower the plan's overall expense structure by shopping around, being an informed buyer, and favoring high-quality, lower-cost investment vehicles. Here are some question you should consider asking any current or future plan service provider. Located at: 401khelpcenter.com, July 2004. Click on headline for full article.

McHenry Consulting Releases 401k Revenue Sharing Report - Summary: McHenry Consulting Group, a leading provider of strategic services to the financial services industry, has released its report on the practice of asset-based revenue sharing between mutual funds and retirement plan service providers. Revenue sharing is the "big secret" of the retirement industry. Never before has there been an objective and explicit analysis of the practice of vendor cross-subsidies. The McHenry Revenue Sharing Report - 'Whose Money is It?' provides employers, plan sponsors, employee/participants and all other observers with the first such resource. Located at: 401khelpcenter.com, September 2001. Click on headline for full article.

For more information on plan fees and costs, go to our COLLECTED WISDOM™ on Plan Fees and Expenses.

To find more information fiduciary liability, go to our COLLECTED WISDOM™ on Fiduciary Responsibility and Liability Issues.

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