Aggregation of fees/Prohibted Transactions

[MoJo]

If a financial service provider provides a break in fees as a result of aggregating ERISA and non-ERISA assets under management together, is that a prohibited transaction by virtue of the indirect use of ERISA plan assets to lower fees on non-ERISA assets managed? I can't seem to find any good authority here....

[Erik Read]

Couldn't you also argue that the use of the ERISA assets in conjuction with the non-ERISA assets also lowers the fees on the ERISA assets? I'm not aware of any sections that give guidance on this issue. You might try looking to the DOL web site, or searching the 401(k) Message board.

Good luck - keep us posted.

[Dowist]

I think you do have a prohibited transaction issue. The principle seems to be that if a non-plan benefit is received as a result of plan assets, that you have an issue. See ERISA ss 406(B), the DOL soft dollar guidance, and the IRA prohibited transaction class exemptions (I think there are exemptions that allow a bank to provide free checking based on your IRA deposits.) I believe you might be able to do something like this if the fee concessions were disclosed to the plan, and the plan made a prudent decision that that the benefits were good for the plan. But read the DOL guidance - it is a very tricky area.