Revenue Sharing

[Randy Watson]

Would it be a breach of fiduciary duty to "sacrifice" some plan participants for the benefit of the plan as a whole? For example, assume that in selecting funds to be made available under the plan, a plan administrator must choose one of two funds. One fund has revenue sharing and one does not. The fund without revenue sharing has a lower fee, but the fund with revenue sharing will reduce the adminstrative expenses of the plan as a whole. Would it be imprudent to select the revenue sharing fund even though the fees charged to those who invest in that fund will be higher than if the other fund was selected? Has the DOL commented on this issue in particular? I have seen the revenue sharing advisory opinions.

[MWeddell]

Depending on the facts, I think selecting the fund with the higher revenue sharing could be considered prudent. Of course there's a lot more involved than just looking at expense ratios when selecting a fund. Also, if the other funds in the plan are priced to include revenue sharing, it may seem like an anomaly to have funds in only a couple of isolated asset classes that don't have revenue sharing.

[JanetM]

Do you have an investment policy statement? What does it say? The final outcome is not the issue actually, the process you followed to select the funds will matter more. Do you have a consistent process that is followed to select and vet the funds?

[Guest gdburns]

You only mentioned revenue sharing and administrative expenses but, What about other fees and the overall cost and return picture?

What about performance?

Can you imagine what could happen if the product with the revenue sharing preformed worse than the product without? It would even be a worse situation if this wa salso the case historically before the choice was made. While past performance is not an indication of future performance, it would certainly put a decision based on revenue sharing alone or as a major consideration into question.

I think that more factors have to be considered.

[david rigby]

Net return, not gross.

Safety of the investment itself.