Fee for Rollover from Fund Company

[austin3515]

Let's say, hypothetically speaking, a fund company decides to pay a TPA a "fee" (albeit a small one) for every rollover that comes out of the Plan and into an IRA with said fund company.

I don;t know, it just doesn't seem right. Smells like a PT...

I shouild repeat that the fee is very very small (less than $20 or so).

[Jim Chad]

Austin

I agree it feels "funny". ("funny" meaning commission).

But I got used to that feeling with several 401(k) platforms paying our firm a very small (5 hundredths of 1%).

It is so common that apparently the courts, in their infinite wisdom, think it is all right.

Anyone else have any thoughts?

[GMK]

For me, the degree of funniness depends on who picks the fund company to receive the rollovers and who provides the guidance and advice on rollover fund options. (I doubt that the answer to either of these is the TPA.)

Still, there remains the issue of who gets an advantage from the assets of the plan. Kinda like revenue sharing, which quacks a little like a kick-back if the plan doesn't put it back into the accounts of the participants invested in the funds that pay the revenue sharing. But maybe I digress.

[austin3515]

For me, the degree of funniness depends on who picks the fund company to receive the rollovers and who provides the guidance and advice on rollover fund options. (I doubt that the answer to either of these is the TPA.)

Apparently, said fund company thinks we do. And I have to say, often times, participants do call us and say "where can I roll this over to" (not appreciating that we are not investment people). And who knows, I think a lot of TPA's would say "hey, you can roll it right to Fund Company!" Perhaps you would even go so far as to insert a brochure into your distribution paperwork. Are we getting any closer to a problem?

[ESOP Guy]

Given the new set of facts I would add you might have a problem of giving investment advice without the proper investment licenses.

PT issue could be an added bonus problem.

This new firm I work for get a $15 check from one of the platform providers if they roll over to them. So far I have never heard anyone in management think those $15 checks are worth enough to make an effort to encourage anyone to roll to their funds. So I am not sure there is a conflict in fact. Although I get the idea of a conflict in appearance might exist. As such if it were up to me I would end the practice. Risk/reward seems out of balance.