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Paying fees on behalf of plan


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An arrangement in which one service provider absorbs or embeds another service provider’s fee might be an exempt prohibited transaction if:

each service provider discloses to each responsible plan fiduciary all details of the arrangement, at least as required under ERISA’s 408b-2 rule [29 C.F.R. § 2550.408b-2 https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-F/part-2550/section-2550.408b-2];

each service provider discloses the further information any responsible plan fiduciary requests;

each service provider discloses the further information needed for each responsible plan fiduciary’s approval to be prudently informed;

each responsible plan fiduciary is independent of all service providers involved in the arrangement;

none of the service providers involved in the arrangement advises any plan fiduciary about whether to approve the arrangement;

each responsible plan fiduciary approves the arrangement as obeying the plan’s governing documents, providing each service provider no more than reasonable compensation, not putting the plan in a disadvantageous arrangement, and otherwise prudently pursuing the plan’s exclusive purpose.

A responsible plan fiduciary would want its lawyer’s advice about how thoroughly and carefully a proposed arrangement meets those and other conditions.

A service provider evaluating whether it is willing to participate in such an arrangement would want its lawyer’s advice about whether the proposed arrangement meets all conditions of ERISA § 408(b)(2) and each further prohibited-transaction exemption the service provider wants to rely on.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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