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Policy to prevent exchanges


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As a recordkeeper, our new client wants to use a specific custodian A - who offers a specific money manager portfolio but who cannot hold American Funds (which they want to offer). We are contemplating an arrangement where the American Funds would be held at Custodian B but still traded on our Platform (which would allow for our website to show complete balances). The issue we have is with fund transfers from A to B - they will take over a week and be very expensive (close to $100 for time and check writing fees).

The issues would be similar if the second custodian was not on our RK platform with the added problem of participants having (possibly) two systems to monitor for their 401k balance.

Assume transmittals are not a problem as the broker is willing to separate that out per custodian.

Is there any prohibition from having an Administrative Policy that prevents transfers between these two custodians except for X times per year (if at all) and attaching those high fees and delayed timing?

Thx.

ERPA, QPA, QKA

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ERISA 404© regulations require the ability to transfer funds among investment options at least quarterly. ERISA standards require that fees paid from plan assets be reasonable. Assuming that each of menu A and menu B would be section 404© compliant by itself and the cross transfer fees were charged by third parties based on their costs or fees generally applicable for the services under similar circumtances, one might be able to conclude that the fees were reasonable and the delay is reasonable. I suggest reconsidering if availability of a particular menu of funds is worth the trouble and if some suspect person or group is behind the demand.

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