Revenue Sharing / RIA / Co-Fiduciary

[austin3515]

TPA Firm ABC (NOT a 3(16)) has an affiliate RIA that works with the various insurance platforms and receives revenue sharing payments from them. RIA is a co-fiduciary because they receive money for giving investment advice.

Would the revenue sharing payments constitute PT's? IT sounds like the relevant section of ERISA is 406(b). I was reading an article related to 3(16) Fiduciary Administrators where Fred Reish is indicating that such providers would NOT have PT's, so long as they are not involved in the investment decisions. So what of the situation I described?

[JRN]

As long as the RIA is receiving level compensation, e.g., a flat dollar amount or a level basis point fee on plan assets, there is not a prohibited transaction. The key point is that the RIA can't be in a position where he/she can impact his/her fee based on the investment advice. For example, if the RIA is receiving 12b-1 fees and the fee for equity funds is 25 bps and the fee for fixed income is 15 bps, etc., that would be a fidicuary self-dealing PT. But, if the comp to the RIA is, say, levelized 25 bps regardless of what funds plan assets are invested in, then no PT.