12(b)(1) fees - can broker/dealer pocket them on their own plan if the

[Guest michaelv]

A broker/dealer client of ours has a 401(k)Plan covering it's own employees. All assets are in mutual funds and are part of an overall bundled service package arrangement. All recordkeeping and trustee fees are being waived.

Since there are no expenses, can the 12(B)(1) revenue be paid back to the broker/dealer? In essence, they are simply pocketing the money. If not, what other options do they have in regard to this revenue?

Thanks - MichaelV

[Erik Read]

Sorry that it has been so long - hope this isn't still an issue for you.

However - I believe that this would be a PT. The B/D is more than likely the sponsor and would be considered a Party-in-interest or "Disqualified Person". If they are benefiting from the plan it's a PT - you'd want to get a writen opinion from either an ERISA attorney or apply for a PLR to be sure.

The only other option is for the B/D to reimburse the plan, the payment would come in under "reversal of management fee" and would need to be split by the participants in each fund as of the end of each quarter when the 12b-1's are paid.

Again - all my opinion on how I've seen things done in the past.

Good Luck.

[Guest michaelv]

Thanks for your reply. I did some digging and came to a similar conclusion.