As the Plan 401 (k) market has evolved, the distribution of income from investment funds (and insurance companies that offer separate account agreements) is used to fund special fees for providers conducting registrations and other administrative services for the plan, and includes a wide range of applications. These suppliers may or may not be related companies of investment funds or insurance. Creditors who receive payments for revenue allocation can use them to offset fees that the sponsor would otherwise pay in accordance with its administrative service agreement and perhaps even the plan document. In this case, the increase in « retail » share ratios defers the costs of general plan management (and other revenue-sharing payments) from the plan sponsor to participants invested in these investment funds. This additional effort significantly reduces participants` performance relative to the potential return they would have been able to achieve if they had made the same investment in the « institutional » category. Callan`s annual surveys show a steady decline in the use of revenue sharing. Many 401k plans move away from income distribution, as leaders cite the need for greater transparency, simplicity and democracy in assessing royalties to participants. But confusion persists among some plan managers. « revenue participation » refers to an agreement whereby a proposed investment fund as an investment option in a plan 401 (k) pays a fee for the provision of administrative or registration services for the plan, either to the plan proponent (usually the employer) or to a planning service provider (a third-party provider). This applies to plan members, as investment funds generally pay such fees for the distribution of income to the employer or service provider by regularly deducting the costs of assets invested in the pension plan. Although plan sponsors generally have the choice of managing or delegating administrative services or 401 (k) registrations themselves, neither option exempts employers from fiduciary duties to control the plan, as required by the 1974 Act (« ERISA »).
Revenue sharing has become a hot topic. These include the selection of investment funds that pay for revenue sharing, their use to pay for the costs of the plan, and the distribution of revenues among participants. The focus on these issues is mainly due to collective actions against major projects and the INSISTENCE of THE DOL to disclose revenue-sharing.