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PEP Participant Fees


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A recordkeeper is basing their fee to service a PEP based on the merits of each individual adopting employer. In other words, the fees for each adopting employer within a given PEP will be different and determined based on their respective total assets (the greater the assets, the lesser the fee). This will inevitably create a situation where the PEP participants will be paying different fees from one another. Could this create a prohibited transaction or otherwise violate ERISA?

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That fees vary by participating employer should not by itself mean a set of fees results in a nonexempt prohibited transaction if the transactions meet the conditions of the statutory and class exemptions the service provider relies on.

For example, ERISA § 408(b)(2)’s exemption can apply only “if no more than reasonable compensation is paid [for the necessary services].”

Also, each participating employer “retains fiduciary responsibility for” selecting and monitoring the pooled plan provider “and any other person who, in addition to the pooled plan provider, is designated as a named fiduciary of the plan[.]” ERISA § 3(43)(B)(iii).

That could include duties for a participating employer, acting with no less loyalty and prudence than ERISA § 404(a)(1) requires, to find the fees charged to its portion of the plan’s assets are reasonable.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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